Pound New Zealand Dollar (GBP/NZD) Exchange Rate Muted as UK Construction Sector Suffers From Worst Month in a Decade
The Pound Sterling New Zealand Dollar (GBP/NZD) exchange rate remained muted and the pairing is currently trading at an inter-bank rate of NZ$1.8937.
On Tuesday, data revealed that UK construction output fell at the steepest rate since April 2009.
The UK construction PMI slumped to a disappointing 43.1 in June, down from May’s 48.6.
June’s reading fell as new orders shrank as political uncertainty hurt client confidence and business activity fell for the second consecutive month.
Commenting on the data, Duncan Brock, Group Director at the Chartered Institute of Procurement and Supply said:
‘Purchasing activity and new orders dropped like a stone in June as the UK construction sector experienced its worst month for a decade.
‘This abrupt change in the sector’s ability to rise the highs and lows of political uncertainty shows the impact has finally taken its toll as new orders dried up and larger contracts were delayed again. The pain of Brexit indecision was felt across all three sub-sectors but the previously resilient housing sector suffered the fastest drop in three years which is frankly worrying news.’
New Zealand Dollar (NZD) Muted as Business Confidence Falls to Decade Low
The New Zealand Dollar remained under pressure as data revealed that business confidence in New Zealand continued to slide.
Added to this, New Zealand companies are the most downbeat since the height of the global financial crisis.
The NZIER (NZ Institute of Economic Research) business confidence for the second quarter of 2019 revealed that confidence fell to -34% from the previous reading of -29%.
This has prompted ASB to forecast that the Reserve Bank of New Zealand (RBNZ) will slash interest rates twice.
Commenting on the data, ASB Senior Economist Jane Turner said:
‘There is evidence to suggest that falling profit margins are now impacting employment demand, and the risk is that a weaker labour market may result in the economic slowdown becoming more entrenched.’
NZ Building Permits Jump to 45-Year High
Meanwhile, further data revealed that townhouses boosted New Zealand building permits to a 45 year high.
Seasonally adjusted building permits rose by 13.2% in May following a slump of -7.9% in April.
However, the disappointing New Zealand business confidence data left the ‘Kiwi’ muted against the Pound.
Commenting on the data, Nathan Penny, ASB Bank Senior Rural Economist stated:
‘We believe house-building activity is likely close to a peak, but we expect residential construction activity to remain at high levels over 2019 in order for housing supply to make up the shortfall which has emerged in recent years.’
Pound New Zealand Dollar Outlook: Will a Disappointing NZ GDT Index Weigh on NZD?
Looking ahead the New Zealand Dollar (NZD) could slide against Sterling (GBP) following the release of the New Zealand Global Dairy Trade Price Index.
If dairy auction prices slide further than expected it could weigh on the ‘Kiwi’.
Meanwhile, the Pound could fall on Wednesday following the release of the UK Markit services PMI.
If the UK services data disappoints in June, it could cause the Pound New Zealand Dollar (GBP/NZD) exchange rate to slide.