Despite this relative underperformance by NZD, we are still feeling very cautious on the GBP/NZD exchange rate. Share prices have rallied to new highs after last week's correction, helping the highs yielding currencies gain ground. Gold continues to soar to new all time highs on an almost daily basis, now trading at $1,168 per ounce, up 7% from when we sent our last report. If risk appetite holds up, we expect the Kiwi to strengthen again.

We've had a very mixed bag of data for the pound over the last week. Public sector borrowing was far higher than expected for October (£11bn versus £7bn expected) and traders are still concerned that further quantitative easing may lie ahead after last week's Bank of England minutes revealed that one MPC member voted for a £40bn increase. On the plus side, inflation for October was a healthy 1.5%, and we are expecting a slight upward revision to the preliminary estimate of third quarter GDP tomorrow.

The technical outlook remains negative, but would improve if we could just break above the early November highs around 2.3125. That would at least disrupt the series of "lower highs" that has dominated the chart for the last eight months. Our advice is to cover at least half of any NZD requirement at current levels to reduce risk, and take a "wait and see" approach on the balance. Clients should also consider using a stop order to protect against renewed downside.