Pound to New Zealand Dollar Exchange Rate Tests Best Levels amid Solid UK Data
As UK PMIs have beaten expectations this week so far, the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate has had an easier time trending near its best levels. Tuesday movement was limited though, ahead of key data due on Wednesday.
Due largely to broad trade jitters keeping risky currencies unappealing, GBP/NZD could be in for another week of gains anyway.
GBP/NZD climbed from 1.9200 to 1.9516 last week and since markets opened on Monday the pair has hit one month high of 1.9616. At the time of writing on Tuesday, GBP/NZD trended near the level of 1.9560.
Demand for the Pound (GBP) has been supported by UK manufacturing and construction data so far this week. As the New Zealand Dollar (NZD) has been weighed by market uncertainties regarding US trade protectionism, Sterling has easily advanced.
Pound (GBP) Exchange Rates Strengthen Despite Brexit Uncertainties
Britain’s June manufacturing and construction PMIs beating forecasts have been enough to bolster Pound support this week so far, despite signs of persisting Brexit uncertainties and a gloomy economic outlook from some businesses.
Following a better-than-expected manufacturing PMI figure on Monday, Tuesday’s UK construction PMI was perhaps even more impressive.
The construction figure was forecast to have slipped from 52.5 to 52.4, but instead it rose to 53.1 – the highest level for the print in seven months and the best figure for 2018 so far.
Not only that, but new orders jumped indicating that the UK construction sector was currently shrugging off the broad economic uncertainties of UK growth and the Brexit process.
Still, due to the UK construction sector’s low influence and some remaining signs of slack, Sterling’s strength was limited. According to Duncan Brock, Group Director from the Chartered Institute of Procurement & Supply:
‘However, before we bring out the bunting, the sector is not out of the woods yet and there needs to be further sustainable activity to be convincing. A cloud of uncertainty remains, given the sector’s hit and miss performance so far this year and lower than average business confidence in June.’
New Zealand Dollar (NZD) Exchange Rate Support Limited as Trade Jitters Persist
Investors have had little reason to buy the New Zealand Dollar over the past week, especially after last week’s Reserve Bank of New Zealand (RBNZ) policy decision was perceived as more dovish than expected.
With few domestic reasons for NZD trade to be bullish, and continued market concerns about the possibility of US-China trade tensions leading to a full blown trade war, the New Zealand Dollar has hit major lows against rivals.
As the New Zealand Dollar is a risky commodity-correlated currency, it has been highly unappealing amid the recent global trade uncertainties.
Tuesday’s New Zealand data did little to influence change in NZD trade either.
The Q2 NZIER business confidence figure printed at -20%, while the Q1 capacity utilisation figure slipped from 93.5% to 92.8%.
Pound to New Zealand Dollar (GBP/NZD) Forecast: UK Services Results in Focus
As services make up a notable chunk of Britain’s economic activity, Pound investors are highly anticipating Wednesday’s June UK services PMI from Markit.
Markit’s UK manufacturing and construction PMIs both beat forecasts this week, bolstering hopes that Britain’s economy has become more resilient than expected in the past month.
However, the services print is the one most likely to have an influence on the Pound to New Zealand Dollar (GBP/NZD) exchange rate outlook.
UK services are currently forecast to have remained at 54.0 in June, but if the figure beats forecasts it is likely to lead to higher Bank of England (BoE) interest rate hike bets and a stronger Pound.
Of course, a weaker services print would have the opposite effect, making investors doubt the likelihood of a Bank of England rate hike any time soon and weighing on the Pound to New Zealand Dollar (GBP/NZD) exchange rate.