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The pound can rise against the New Zealand dollar short-term, but we're wary of some notable technical and fundamental resistance.
The pound to New Zealand dollar exchange rate (GBP/NZD) rises to 2.3364 on Monday, putting the 2025 peak at 2.3552 back in contention.
December's gains mean the market starts January with some solid upside momentum, in keeping with the broader rally we saw in sterling.
Technical momentum is positive, with the RSI pointing higher at 60.
The pair is also above its major moving averages, including the 21-day, advocating for further gains.
However, there's some decent technical resistance starting around 2.3429, which protects the 2025 high at 2.3552.
This week, we forecast the 2.3429 level being achieved and view a high at 2.3552 being in store later this month.
Much depends on whether the current GBP/NZD rally is linked to a broader GBP rebound that followed the passing of the UK's November 26 budget.
Post-budget relief has prompted traders to reduce GBP shorts, which has helped GBP/NZD drift up.
Potential impetus could be realised through January and February if data outturns show that confidence across the economy improved following the passing of the budget.
The big risks for those chasing GBP/NZD higher is that recent gains are merely a 'short covering' rally that ultimately fades.
Here, GBP/NZD upside might be harder to realise, confirming we're at the
top of the rally.
This would be the case if the Reserve Bank of New Zealand confirms it has ended its interest rate cutting cycle.
The Bank of England will likely cut rates again this year, meaning there is a strong case for interest rate policy to diverge in favour of NZD this year.