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Jump in UK Manufacturing Sees Pound New Zealand Dollar Exchange Rate Rally

New Zealand Dollar Currency Forecast

The Pound New Zealand Dollar (GBP NZD) exchange rate rallied this morning following a surprise surge in the latest UK Manufacturing PMI.

Pound New Zealand Dollar (GBP NZD) Bolstered by Surge in Manufacturing Data

The Pound climbed around half a cent from its worst levels against the New Zealand Dollar this morning as Markit reported that the UK’s manufacturing sector performed better than expected last month.

UK manufacturing benefited from a rise in both domestic and global demand, causing the PMI to report a jump from 53.6 to 56.1 in December, both outperforming market expectations that it would drop to 53.3 and reaching its highest levels since June 2014.

However there are concerns that the growth will not last as a fall in consumer spending will outpace any potential boost in exports due to the fall in value of the Pound. As Samuel Tombs, chief UK economist at Pantheon Macroeconomics explains;

‘We continue to think that domestic demand for manufactured goods will crumble as consumers experience a renewed squeeze on their real incomes. At the same time, the boost to growth from Sterling’s depreciation will remain relatively modest because exporters have raised Sterling prices sharply and because uncertainty about the UK’s future trade relationships will deter exporters from investing.’

New Zealand Dollar Pressured by Resilient US Dollar (USD)

Despite climbing in early trading, New Zealand Dollar gains have been muted somewhat by the strength of the US Dollar (USD) as the upcoming inauguration of Trump is expected to stimulate growth in the US economy.

The ‘Kiwi’ has also been hit by a slight drop in market risk appetite, as concerns over growth in China has caused commodity prices to weaken.

GBP NZD Forecast: Dairy Prices May Bolster ‘Kiwi’

The Pound to New Zealand Dollar exchange rate may fall later today following the latest Global Dairy Auction. The ‘Kiwi’ is likely to appreciate if there is an uptick in the price of New Zealand’s largest export, however should prices decline as they did at the previous auction then NZD will likely tumble.

Meanwhile the Pound may fall tomorrow if the UK’s Construction PMI falls from 52.8 to 52.6 as predicted, although a surprise surge similar to today’s Manufacturing PMI could allow Sterling’s recovery to continue.

Looking to the year ahead it is highly likely that the GBP NZD exchange rate will reach a new all-time low as the UK prepares to split from the EU, with formal ‘Brexit’ negotiations set to begin in March.

Current Interbank Exchange Rates

At the time of writing the GBP/NZD exchange rate was trending around 1.77 and the NZD/GBP exchange rate was trending around 0.56.