After last week’s heavy losses, courtesy of ‘Brexit’ concerns, GBP/NZD has been able to recover since the start of this week, although it is still trending at levels well below those seen before Boris Johnson announced his support for the ‘Leave’ campaign.
Over the past seven days, Pound Sterling has been able to make steady gains on the New Zealand Dollar, with the GBP/NZD exchange rate trending between 2.0643 and 2.1233.
NZD Advances as UK GDP Figures Reveal Economic Imbalance
Thursday saw key UK data perform its usual trick of printing favourably, while hiding a more disconcerting conclusion within the figures. Gross Domestic Product figures were no exception to the rule, meeting forecasts to show a consistent level of growth. However, a closer look at the figures revealed that, once again, consumer spending has picked up the slack, with a fall in the manufacturing sector significantly dragging on growth.
The figures started GBP/NZD on a downtrend which continued when New Zealand published strong trade figures, showing a small rise into surplus rather than a large widening of the deficit. Analysts had predicted the trade balance would expand from -NZ$38 million to -NZ$271 million, but instead figures showed a NZ$8 million surplus. Although the year to date (YTD) trade deficit did widen, it did so by much less-than-forecast.
News that the GfK Consumer Confidence index had dropped to 0 initially kept Pound Sterling weak on Friday, although strong GDP data from the US weakened appetite for the risky New Zealand Dollar, allowing GBP/NZD to advance.
UK and New Zealand Business Outlooks Slump, Dairy Prices Rise
A significant drop in business outlook during Monday’s Australasian session weakened the ‘Kiwi’, allowing the Pound to advance even though the Lloyds Business Barometer saw a similar fall. The ANZ Activity Outlook slumped from 34.4 to 25.5, while the NBNZ Business Confidence index dived from 23 to 7.1. Significant increases in consumer credit and mortgage approvals further helped strengthen GBP/NZD.
The ‘Kiwi’ managed to resist the downward pressure from another strong round of US data yesterday thanks to the results of the latest GlobalDairyTrade auction. The price index rose 1.4%, marking the first time in 11 weeks that dairy prices haven’t fallen, with the average price per metric tonne rising to US$2,253.
Moody’s China Downgrade could negatively affect New Zealand Dollar
GBP/NZD is making bullish gains of over 1% today after ratings agency Moody’s downgraded their outlook for China, one of New Zealand’s main trading partners. A suggestion that conditions were going to worsen in China lowered the outlook on demand for New Zealand goods, which could weaken trade.
Looking ahead, tomorrow sees the release of UK housing price data, as well as the Markit services and composite PMIs. There is little important data for New Zealand due out for the rest of the week, but another run of key US data on Friday, including the influential Non-Farm Payrolls, could further weaken the ‘Kiwi’ if it prints positively.
Heads Up
Summary of major upcoming data releases that we think may move the market.