WELLINGTON: The Pound outperformed the New Zealand Dollar over the past week and we believe an extension of this performance remains possible over coming days. The GBP into NZD conversion continues to solidify its base above the 1.770 support level. The currency pair moved up from a weekly open at 1.7975 to close at 1.8117 ensuring some international payments are now being quoted just below 1.79.
The rise in GBP/NZD has seen us turn more bullish on the pair having observed it breach a key trend-line marking the trend down from the May highs. The pair is expected to continue rising from its current level, with a breakout above the current flag-like continuation pattern at 1.8115 leading to a continuation up to a target at 1.8200.
The going higher has not been particularly easy for the pair, however, after a combination of stronger New Zealand export data and less pessimistic commentary from the central bank suggested the outlook for the economy had improved, and supported the NZD side of the pair as well. It had been expected that the Reserve Bank of New Zealand (RBNZ) would make at least one if not two more cuts to try to give inflation a leg up and support exports, however, comments from RBNZ governor Wheeler on Tuesday indicated he was in no hurry to cut interest rates.
Part of the reason for his change in stance may have been as a result of recent data showing a very strong 12.7% rise in dairy export prices, New Zealand’s largest export. Prices had been previously languishing in the doldrums and the RBNZ had themselves commented that one reason to try to weaken the kiwi via more easing was to help make dairy exports more competitive.
