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Pound to New Zealand Dollar Exchange Rate Advance Continues as Britain’s Economic Outlook Rises

Pound to New Zealand Dollar Exchange Rate Nears Half-Month Peaks

Despite a lack of fresh support for the Pound (GBP) today, the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate is continuing its advance. Continued Pound optimism and market risk movement is driving the pair.

Last week saw GBP/NZD advance from 1.9524 to 1.9615 amid the market’s risk-off movement. This week so far, GBP/NZD has once again been climbing.

At the time of writing today, GBP/NZD is trending near the level of 1.9786. This puts it close to the best GBP/NZD levels since the 19th of December, when the Pound plunged on Brexit uncertainty.

Amid a lack of notable New Zealand data, the New Zealand Dollar (NZD) is being driven by global geopolitical jitters this week.

Pound (GBP) Exchange Rates Benefit from UK Outlook Hopes

Last week’s worse than expected UK manufacturing and construction PMIs worsened concerns that Britain’s economy was seeing an extended period of fresh weakness due to political and Brexit uncertainties.

As a result though, yesterday’s UK services PMI impressed markets as the results beat market projections.

The services PMI printed a stagnant 50.0, avoiding the projected contraction of 49.2, and the details of the report showed that new orders had improved significantly. It boosted hopes that economic activity would improve even amid another year of Brexit uncertainty.

Tim Moore, Economics Associate Director at IHS Markit, said:

‘The modest rebound in new work provides another signal that business conditions should begin to improve in the coming months, helped by a boost to business sentiment from greater Brexit clarity and a more predictable political landscape.’

New Zealand Dollar (NZD) Exchange Rates Remain Unappealing amid Geopolitics

The New Zealand Dollar (NZD) is a currency often correlated to market risk and trade sentiment, and it has been rocked by the news dominating headlines since last week.

At the end of last week, the US killed a top Iranian Military Official in an air strike. The news shocked markets, with analysts quickly expressing concern that tensions are only likely to worsen further.

Investors sold the risk-correlated New Zealand Dollar, favouring safe haven currencies instead, amid the panic.

While no further escalation is seen yet, analysts still believe it is likely. According to Lee Hardman, Currency Analyst at MUFG:

‘Iran is almost certainly to respond in some scale, scope and magnitude,

market participants are likely to remain nervous until there is more clarity over how geopolitical tensions between the US and Iran will proceed,’

Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Awaits Political Developments

As this week’s economic calendar is relatively quiet, the Pound to New Zealand Dollar (GBP/NZD) exchange rate is likely to be driven more by political news in the coming sessions.

Britain will be leaving the EU at the end of January, and investors are closely watching the UK government for signs of how the Brexit process could unfold over the coming year.

Unless there are surprising Brexit developments though, the Pound’s movement may remain fairly limited and could continue to see support on economic growth hopes.

Instead, the New Zealand Dollar’s movement may be more likely to cause shifts in GBP/NZD trade.

If US-Iran tensions or actions escalate, market risk-sentiment is likely to take a fresh hit which would keep pressure on the ‘Kiwi’.

The Pound to New Zealand Dollar (GBP/NZD) exchange rate would weaken if tensions somehow soften instead, however.