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GBP/NZD Exchange Rate Benefits from New Zealand’s Surprisingly Weak PMI

Pound New Zealand Dollar Currency Forecast

GBP/NZD Exchange Rate Advances despite Gloom over UK-EU Trade Relations 

A weaker New Zealand Dollar (NZD) made it easier for the Pound to New Zealand Dollar (GBP/NZD) exchange rate to advance today. This was despite Sterling (GBP) being hit by fresh post-Brexit anxiety. 

Since opening this week at the level of 1.9309, GBP/NZD has been trending with an upside bias. This has been due largely to weakness in the New Zealand Dollar as it struggles to keep trending strongly. 

At the beginning of the week, GBP/NZD touched on a high of 1.9450. This was the best level for the pair in four months, since November 2020. 

While GBP/NZD has been unable to hold that high, GBP/NZD is still trending relatively strongly in the region of 1.9409 at the time of writing. 

A Bank of England (BoE) policy decision and New Zealand growth rate data mean next week could also be a key week for Pound to New Zealand Dollar exchange rate movement. 

Pound (GBP) Exchange Rate Appeal Dampened as Brexit Shows Signs of Hurting UK Trade 

At the beginning of this year, the UK fully split from the EU and a new UK-EU deal has been implemented. 

Today, the first solid January trade report has been published, and the impact Brexit has had on UK-EU trade was even worse than analysts predicted. 

Allie Renison, Senior Policy Adviser at IoD, said: 

‘Even taking account the December start to lockdown and stockpiling increase in the months leading up to January and Brexit proper, these figures are horrendous.’ 

Still, the Pound was able to hold higher against the weak New Zealand Dollar today. Sterling may have found a little extra support thanks to today’s UK growth rate report from January, which was not as bad as forecast. 

New Zealand Dollar (NZD) Exchange Rates Fail to Capitalise on Risk-On Movement 

The New Zealand Dollar is a relatively risky trade-correlated currency. This means its movement often correlates to market sentiment. 

However, the New Zealand Dollar has been unable to capitalise on this week’s risk-on movement. 

The New Zealand Dollar’s broad strength recently may have run out of steam. Investors looking for higher yielding riskier assets bought other risk and trade-correlated currencies this week, such as the Canadian Dollar (CAD). 

The latest New Zealand data didn’t offer the currency any fresh support either. New Zealand’s latest Business PMI fell well short of expectations. 

According to Catherine Beard, Executive Director for Manufacturing at BusinessNZ: 

‘Despite the PMI remaining in expansion, the proportion of those outlining negative comments stood at 54%, compared with 46% in January. Given the second recent partial lockdown, it remains to be seen what impact this will have on the sector over the next few months.’ 

Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Could be Knocked by BoE Next Week 

The Bank of England (BoE) will hold its March policy decision next Thursday. While no change in policy is expected from the bank, the decision will be closely watched as always for potential shifts in tone. 

Following all the optimism around Britain’s potential for economic recovery lately, a more cautious than expected bank could take the wind out of the Pound’s sails. 

For example, if the bank raises concerns about post-Brexit trade issues, it could dampen the Pound’s recent appeal. 

On the other hand though, if the bank is more optimistic than expected it could extend the Pound’s recent rally. 

Investors will also be closely watching New Zealand growth data next week. Q4 growth figures are due during Thursday’s Asian session. 

If they beat expectations they could buoy New Zealand economic optimism again and push the Pound to New Zealand Dollar (GBP/NZD) exchange rate lower.