The Pound-to-New Zealand Dollar Rate's Forecast For the Week Ahead

- GBP/NZD is in a short-term downtrend which is forecast to extend in the week ahead

- The key release for the Pound is Manufacturing PMI out on Friday 

- The most important release for the New Zealand Dollar is the Financial Stability Report midweek

new zealand dollar and economy concept 1

© Rafael Ben-Ari, Adobe Stock

GBP/NZD is trading at 1.9172 on the interbank market as the new week begins.

The pair has continued to fall mainly due to the Pound weakening because of falling expectations that the Bank of England (BOE) will raise interest rates soon.

Previously the markets had expected several rate rises in 2018 but now they are less certain due to stuttering growth and continued Brexit uncertainty.

On balance we see a likelihood of a continuation of the short-term downtrend which can be identified by the descending sequence of peaks and troughs on the four hour chart (see below).

A break below the 1.9135 lows would probably lead to a continuation down to a target at 1.9035.

At that level the exchange would be expected to probably either stall or bounce as a result of touching down on the March lows and the 200-day moving average (MA), which is just below at 1.9023. 

Large MAs often obstruct the trend as they are popular indicators and, therefore, the location of increased supply and demand.

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NZD - What to Watch

The main event for the New Zealand Dollar (Kiwi) in the week ahead, is the release of the bi-annual Financial Stability Report (FSR) on Wednesday, May 30, at 1.10 GMT and an accompanying speech from Reserve Bank of New Zealand (RBNZ) chairman Adrian Orr.

The FSR is an important document assessing the stability of the financial system and the risks to it, the economy and the RBNZ's policy response.

When he last gave a speech after the April policy meeting, Orr was quite phlegmatic, saying policy was unlikely to change anytime soon. This scotched hopes a rate rise might be on the cards and hit the Kiwi, which lost ground as a result. 

Other releases for the Kiwi in the coming week include Building Consents on Tuesday May 29 at 22.45 and ANZ Business Confidence, which saw a negative -23.9 result in April (after a run of poor results) and is scheduled for release at 1.00 on Thursday morning. 

GBP - What to Watch

The main release in the week ahead is probably UK Manufacturing PMI for May, out at 9.30 GMT on Friday, June 01, which is forecast to rise from 53.9 to 54.9.

The manufacturing PMI is an index score generated from survey responses of key business managers in the sector. It is a fairly reliable leading indicator of growth. A higher-than-expected result would probably push the Pound higher versus the Euro, especially if the final Eurozone Manufacturing PMI result, which is out only a half an hour earlier, continues to show a contrasting move down.

The busiest day is probably Thursday, May 31, when the Nationwide House Price Index (HPI) is scheduled for release at 7.00, followed by third-tier releases at 8.30 covering credit and lending, such as Net Lending to Individuals, Consumer Credit and Mortgage Approvals; and also M4 Money Supply (all for April).

Another significant release in the week ahead is Consumer Confidence, which is out at 23.01 on Wednesday. Experts are forecasting a slight recovery in to -8 from -9 previously. The release is often a good barometer of future trends in the economy given the disproportionate importance of consumers in the UK economy.

The British Retail Consortium's (BRC's) Shop Price Index, meanwhile is out at 23.01 on Tuesday evening.

Apart from hard data, there may be a lot of focus on Brexit as the EU summit in June to decide the next stages of the process gets nearer.

"Through the remaining four days Brexit may see a renewed focus ahead of the 28-29 June EU Leaders’ Summit. There have been some reports that talks with Brussels will begin again on Tuesday. Meanwhile, the Tory party has been put on notice for an early June return of the EU Withdrawal Bill to the House of Commons after its spell in the Lords," says Victoria Clarke, an analyst at Investec.

Get up to 5% more foreign exchange by using a specialist provider to get closer to the real market rate and avoid the gaping spreads charged by your bank when providing currency. Learn more here.