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The pound to New Zealand Dollar exchange rate (GBP/NZD) retains a bullish setup and should test the 2025 highs again.
The New Zealand dollar slumped after U.S. President Donald Trump on Friday said the U.S. would increase import tariffs by 100% on November 01 unless China dropped newly installed export restrictions on crucial rare earth materials.
Monday sees the Kiwi regain some of the ground lost on Friday, largely because China and the U.S. signalled a willingness to negotiate the matter ahead of the month-end meeting between Presidents Trump and Xi in South Korea.
Yet, the slump reminds markets that the NZD is highly sensitive to trade war fears and will stay vulnerable over the coming days as investors await further updates on the latest trade flare-up.
GBP/NZD surged to 2.3356 on the back of the Friday news, a level that represents the 2025 high.
This line stretches back to a peak printed just last week in the wake of the Reserve Bank of New Zealand's (RBNZ) 50 basis point interest rate cut, and then back to April when the White House announced its 'Liberation Day' tariffs.
So it really is a strong resistance line that has some relevance for those watching the charts:
So where to from here?
The setup is constructive and advocates for further upside, and we don't recommend standing in the way of this well established trend.
The pair trades above the 21-day exponential moving average, and the Relative Strength Index (see lower panel) indicates positive momentum while not yet trading at overbought.
The pair resides above other key moving averages, meaning that any periods of weakness will be viewed as countertrend pullbacks and not a sign that the GBP/NZD is done climbing.
A test of that 2.3356 peak looks to be on the cards this week and fresh post-2016 highs could even be delivered.
There are no top-line New Zealand data releases due this week, but there are some second-tier releases.
Watch REINZ house prices on Tuesday, where we should get some confirmation that New Zealand's housing market remains fairly static, meaning last week's rate cut will be welcomed by home owners.
Retail card spending data is also due for release Tuesday, and here the expectation is for another monthly increase. What is striking is that card spending has fallen sharply since 2022 and is well below its long-run average.
For sure, this hunkering down by the consumer is down to those RBNZ rate hikes we saw at the back of the post-Covid inflation surge and the subsequent economic slowdown.
The RBNZ's rate cuts will surely go some way in boosting spending in the coming months, which should help the economy out of its moribund state.
For the Kiwi, it's that morose economic pulse that is the reason for its notable underperformance this year; only when we get clear signs of building economic momentum will the tide finally turn for the currency.