GBP/NZD Forecast to Trend Lower in December
The New Zealand dollar is projected to maintain the positive momentum it has enjoyed against the British pound since September.
The pound to New Zealand dollar exchange rate (GBPNZD) has been under selling pressure since a multi-month uptrend died out at 2.46 back in September.
The turnaround came as expectations for an early-2016 interest rate rise at the Bank of England were discounted ensuring the interest rate support afforded to sterling suddenly dried up.
September was also a turning point for the kiwi currency as data improvements in the domestic economy emerged as previous interest rate cuts made by the RBNZ started to make a positive impact on the economy.
We also noted that the long-term downtrend in global commodity prices - something that has a high correlation with NZD performance - started to form a bottom.
While dairy prices have underwhelmed it is worth noting that the outlook is certainly brighter for this key source of income to the island nation.
Add to this waning expectations on UK interest rate rises and what emerged was an almost unanswered decline to 2.24:
This round number was however layered with buy orders at which major banks and big-money names were happy to exit the market and book profit.
The recovery that took place through October / November was then halted by another set of massive orders layered at 2.34.
Traders know that this area is a massive sticking point from the experiences of June through to September when it provided initial resistance and then support.
Until the 2.34 area is cracked we would suggest a downside bias will be maintained in the GBP to NZD exchange rate.
Latest Pound / New Zealand Dollar Exchange Rates
  | Live: 2.3118▼ -0.04%12 Month Best:2.3553 |
*Your Bank's Retail Rate
| 2.2332 - 2.2424 |
**Independent Specialist | 2.2794 - 2.2887 Find out why this is a better rate |
* Bank rates according to latest IMTI data.
** RationalFX dealing desk quotation.
As such, from a technical angle at least, a decline towards that solid support zone at 2.24 is likely.
What those hoping for a stronger British pound desperately need is for the Bank of England to step up with a more hawkish stance on interest rates.
We learnt this week that the chance of an interest rate rise in coming months is as remote as ever.
One thing that could prove to be a game-changer is inflation which could start rising rapidly in 2016. If so, then we could well see the Bank change tone and usher in a new period of appreciation in UK bond yields and the exchange rate.
Watch for inflation and wage numbers due for release in mid December - if a positive surprise is sprung we could well see sterling walk into the new year with a spring in its step.
