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The Pound to New Zealand Dollar exchange rate (GBP/NZD) could test 2.2693 this week.
The British Pound is looking to build on a recent upswing that sees it on course to register a ninth daily gain in eleven.
Unsurprisingly, a host of short-term indicators we monitor as part of our Week Ahead Forecast modelling are positive: spot is back above the nine-day exponential moving average (2.2539), which is consistent with an evolving uptrend, and the Relative Strength Index (see lower panel in chart) is back above 50 and pointing higher.
This speaks of momentum that should carry the exchange rate to a first potential test around 2.2694, which is where graphical resistance from the July highs starts to build.
The chart shows this is an initial resistance area ahead of the multi-week range highs towards 2.2781, which must be broken if the longer-term GBP/NZD uptrend that took us to post-2016 highs earlier this year is to restart.
So, we are in an upswing in a broader consolidation range. This tells us that further near-term gains are likely, but the extent of the gains is strictly limited for now, which should help NZD buyers understand the extent of what's possible.
Given the momentum, a test of 2.2694 is preferred, but once here, we would be alert to any setbacks and ultimately a capitulation that allows for a return to the lower end of the range as the sideways cycle continues.
More broadly, the GBP/NZD impulse higher reflects a broader upswing in GBP in the wake of last week's Bank of England decision.
To summarise: the Bank cut rates but gave strong signals it could have to pause the cycle sooner rather than later on account of unruly inflation.
This has prompted a paring in rate cut expectations that has the effect of raising short-term bond yields, which has a magnetic pull on the Pound.
Going into August's decision, the market had increasingly bet on lower Bank of England rates following a run of below-consensus data releases.
The poor showing has also left sentiment regarding the UK economy and the Pound downbeat as we go into this month's data calendar.
Because sentiment is so poor, we think the best risk-reward scenarios lie to the upside for the Pound, i.e. the currency will show a bigger upside response to above-consensus data releases than it will to downside misses.
Tuesday sees the release of the first major calendar event as wage and job data come out. Here, we look for further confirmation that the employment market continues to deteriorate.
But, the ONS jobs report is a bit of a mess at present owing to the collapse in the response rate to the survey. This means markets are left looking at a number of sub-readings in the report, for instance the PAYE measure of employment.
REC/KPMG Report on Jobs, July 2025.
There is no single figure that will prove to be a smoking gun for the market, meaning the release has certainly become something of a 'vibes' report that must be digested in its entirety.
Should the data fail the vibes test, we would look for the Pound to weaken on the day but for losses to be shallow and bought into as the Bank of England has indicated that it might look through weak labour market prints as it focusses on the uncomfortably high level of inflation.
But, because sentiment towards the UK is so downbeat, any positive surprises should trigger further gains in GBP and a continuation of recent recoveries in the major pairs.