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The pound can build on recent gains against the NZ Dollar.
The pound to New Zealand dollar exchange rate (GBP/NZD) spiked to 2.3150 following last week's surprisingly weak Kiwi GDP data, which showed a 0.9% decline in the second quarter of the year.
The figures prompted money markets to price in further interest rate cuts at the Reserve Bank of New Zealand, and this mechanically weighed on the domestic currency.
NZD lost ground against all its G10 peers last week, and even the unremarkable pound sterling managed to catch a lift higher in the slipstream of more consequential pairs such as USD/NZD and EUR/NZD.
While above the key moving averages, GBP/NZD upside is preferred, and there is scope for the pair to retest last week's peak at 2.3150 again before the August 20 peak at 2.32 comes into play.
However, before this can happen we think it prudent to allow for some of the recent strength we have seen in the pair to unwind and a consolidative spell of trading wouldn't be amiss for the first few days of this week.
The signal from New Zealand's economy is that it could benefit from lower interest rates, and the RBNZ is likely to comply at its next meeting on October 08.
In fact, it could cut rates a couple of times after this, which means Kiwi interest rates are heading lower at a time when rates in the Eurozone and UK are being held steady.
This creates a divergence that tends to favour the likes of EUR and GBP against the NZD, and is why the trends in EUR/NZD and GBP/NZD are to the upside.