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The Pound-to-New Zealand Dollar exchange rate's week ahead forecast.
The 'Buy America' trade surplants the 'Sell America' at the start of the new week as the U.S. effectively abandons its harsh tariff policy on China.
The U.S. and China have agreed to revert to tariff rates that were in place prior to April 02, meaning the U.S. has blinked and abandoned the tariffs that were the centrepiece of Donald Trump's economic marquee.
The NZD is sensitive to sentiment regarding China, and that China has effectively forced the U.S. to revert to pre-'Liberation Day' tariff levels is a big win for the world's second-largest economy and its proxies.
Being one of these proxies, the New Zealand Dollar finds the news to be a supportive development, and we are seeing the currency benefit at the head of a new week.
However, the Pound-to-New Zealand Dollar exchange rate (GBP/NZD) is holding close to the previous week's close, suggesting the Kiwi is not doing as well as we would have expected in the circumstances.
Although undramatic, the response is actually quite helpful in allowing us to identify a rough outline for where price action might gravitate in the coming days.
GBP/NZD has risen to 2.2458 and is locked on the nine-day exponential moving average, and it's reasonable to believe that further price action can be expected to linger around here in the coming week, with gains and losses ultimately being faded by a mean-reverting market.
Gains could extend to 2.26, the April peak, but it's quite difficult to anticipate anything higher than here, given the good news concerning global trade will continue to benefit the Kiwi, even if it's not flying away.
To the downside, there is ample support in the vicinity of 2.22, and perhaps the feel-good tone that is guiding financial markets at the start of the week can continue to feed into NZD performance and pressure GBP/NZD lower.
For the time being, a break below these supports is a low-probability event.
Part of GBP/NZD's resilience will have something to do with the Pound Sterling also benefiting from news that China and the U.S. have taken a step back from a damaging trade war.
The Pound tends to outperform at least half of the G10 pack of currencies when the investor mood is constructive, which allows it to hold the Kiwi at bay.