Can GBP/NZD recover to last week’s levels?

Before moving on, ICYMI, I’ve listed the potential economic catalysts that you need to watch out for this week. Check them out before you place your first trades today!

And now for the headlines that rocked the markets in the last trading sessions:

Fresh Market Headlines & Economic Data:

Sterling plunges to all-time low in scathing appraisal of fiscal plan

PBOC raises forex risk reserve ratio for forward trading

Jibun Bank Japan manufacturing down from 51.5 to 51.0, services PMI up to a three-month high of 51.9 in Sept

UK Rightmove house prices up by 0.7% in Sept vs. 1.3% decline in Aug

Oil prices fall for a second day on concerns for expected recession

German business sentiment slumps from 88.4 to 84.3, the lowest level since May 2020

Upcoming Potential Catalysts on the Forex Economic Calendar:

ECB’s Lagarde to testify in Brussels at 1:00 pm GMT
FOMC member Mester to talk economic outlook at 8:00 pm GMT

What to Watch: GBP/NZD

GBP/NZD 4-hour Forex Chart

GBP/NZD 4-hour Forex Chart

In case you missed it, the British pound (GBP) extended its losses from last Friday when U.K. Chancellor of the Exchequer Kwasi Kwarteng announced a “mini budget plan” that included basic income tax cuts.

While it would provide extra income for consumers, it would also likely fuel inflation and undo some of the impacts of the Bank of England’s (BOE) interest rate hikes.

GBP continued to fall across the board. GBP/NZD, in particular, fell all the way to the 1.8200 zone before it found enough buyers.

Will GBP/NZD go back to its 1.8200 lows?

GBP is now trading closer to 1.8800, which lines up with a major support area from earlier this year and the 50% Fibonacci retracement of the previous days’ selloffs.

Market sentiment probably won’t change either.

Unless we hear new updates, GBP bears can keep pricing in the inflationary effect of the U.K.’s tax cuts while China (one of New Zealand’s largest trading partners) and other Asian countries reopen their economies.