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The pound should remain buoyant against the New Zealand dollar this week.

The pound-New Zealand dollar pair reached a nadir at 2.2428 in early Asian as traders responded to the conflict in the Middle East, with the pound proving one of FX's biggest losers to the conflict.

That's likely because the UK is a net energy importer and is very vulnerable to another inflationary event just when hopes are building that inflation is about to fall back to the Bank of England's 2.0% target.

By contrast, the New Zealand dollar seemed to have done OK on the news, and we think that's due to a combination of New Zealand's geopolitical remoteness and its status as a commodity currency.

The reaction in GBP/NZD is nevertheless a little surprising: there's a strong and persistent historical precedent for GBP/NZD to rise when stocks are selling off in risk-off market events, as the NZD has a higher beta to investor sentiment than does sterling.

So on that basis alone, we're not surprised to see the GBP/NZD recover from the lows and note that it confirms there to be a region of support in the run-up to 2.24:

From here, we see the exchange rate consolidating in line with the trends since late February, which has us forecasting a retest of 2.26 and maybe even higher in the coming week.

The week will almost certainly be dominated by geopolitical developments and we're going to be stuck to the news channels, looking for signs that the U.S. is preparing an offramp for Iran.

U.S. President Donald Trump doesn't want oil prices to be high for any extended period of time, and Iran has taken a pummelling, meaning the odds of a serious escalation from here are relatively low.

In such a scenario, we'd imagine the pound recoups the losses it has recorded in recent days.