With the UK’s services PMI for August inspiring confidence among investors, the Pound New Zealand Dollar exchange rate started the week on a positive note.
However, the New Zealand Dollar has been making considerable gains in most of its other pairings owing to low confidence in the US and talk of a ‘refresh’ for the nation’s trading strategy.
Over the course of last week, the GBP/NZD currency pair fluctuated between 1.8034 and 1.8336.
Pound Riding High after UK Services PMI Returned to Growth
The Pound recorded gains against the New Zealand Dollar during Monday’s European session thanks mainly to the result of August’s crucial UK services PMI.
While this had been forecast to rise from 47.4 points to 50.0, the actual result was a better-than-expected increase to 52.9.
Additionally, the composite PMI for August saw a rise from 47.5 to 53.6, which again bettered predictions.
For the Pound, this news resulted in an advance above 1.82 against the New Zealand Dollar, although concerns about the UK’s long-term economic performance limited GBP gains.
New Zealand Dollar Firmer on USD Weakness, Trade Policy Talks
While New Zealand data was lacking on Monday, the ‘Kiwi’ still managed to advance against virtually all of its usual competitors thanks to poor data from the US and remarks from NZ Minister of Trade Todd McClay.
The US Dollar was trading in a weaker position during the national Labor Day holiday due to a lack of domestic data and renewed concerns that not hiking the US interest rate soon could result in long-term damage for the domestic economy.
These fears and reduced expectations of an increase in US interest rates resulted in heightened demand for commodity currencies like the New Zealand Dollar.
Meanwhile, McClay’s speech touched on trade openness and agreements being made to ensure future national prosperity.
Most of McClay’s rhetoric was based on balancing, such as looking at past trade deals when considering future ones and ensuring that exports and imports remained in a state of harmony.
GBP/NZD Exchange Rate Forecast
This week, Pound Sterling/New Zealand Dollar exchange rate movement may occur as a result of Tuesday’s New Zealand dairy auction and Q2 manufacturing production result, Wednesday’s speech from Bank of England (BoE) official Jon Cunliffe and UK Q3 GDP estimate, Thursday’s speech from UK Chancellor Philip Hammond and Friday’s UK balance of trade result for July.
In brief, manufacturing in New Zealand is forecast to decline on the year, the UK GDP estimate is expected to be revised down and the current UK trade deficit is expected to reduce from -5.1bn to -4.5bn. However, with dairy being New Zealand’s primary export, a positive result at the upcoming dairy auction could see Sterling reverse gains against the ‘Kiwi’.