A choppy few days of trading last week saw the GBP NZD exchange rate fall to a one-month low of 1.71, before rebounding to an eight-week high of 1.75.
Rising US Rate Hike Hopes Reverses Earlier GBP NZD Downtrend
The GBP NZD exchange rate saw choppy trading last week, edging down to its lowest level in nearly a month of 1.71 on Wednesday.
The pairing had started the week recording strong gains after the New Zealand trade balance unexpectedly plunged further into deficit. Instead of recovering from a shortfall of -36 million to -25 million, the balance of trade dropped to -285 million, bringing the year-to-date balance up to -3468 million instead of -3195 million.
But GBP NZD quickly lost gains after Wednesday’s Markit UK manufacturing PMI for February dropped much further than expected. The index had been predicted to edge down from 55.9 to 55.6, but instead fell to 54.6.
While economists pointed out that even this three-month low still left the index significantly higher than it had been before the referendum, investors sold the Pound on the fear that the rest of the week’s PMIs would perform similarly.
Those fears were realised on Friday, when the services index fell to a worse-than-expected five-month low of 53.3 and the composite fell from 55.4 to 53.8 against forecasts of a rise to 55.6.
However, hawkish comments from US Federal Reserve officials supported the Pound New Zealand Dollar sharply higher towards the weekend, despite poor UK data.
Sluggish New Zealand Construction Figures Allow GBP NZD to Advance
Despite fears of an economic slowdown, GBP NZD has managed to advance today. The New Zealand Dollar remains weak after Friday’s comments by Federal Reserve Chair Janet Yellen saw the markets pricing in odds of 94% that US borrowing costs would be hiked this month.
Additionally, the ‘Kiwi’ is on the decline after economists expressed concern with the latest building permits data, released over the weekend. The number of consents issued grew just 0.8% after a -7.9% slump in December.
‘Construction activity remains a key driving force of New Zealand’s economic growth,’ ASB Senior Economist Jane Turner commented. ‘The slowdown in Auckland housing consent growth is concerning given existing supply shortages.’
By contrast, Building and Construction Minister Nick Smith has recently claimed he is happy with the current rate of new projects, stating ‘I am particularly encouraged by the ongoing strong growth in residential building activity, that has increased 19 per cent nationally and 27 per cent in Auckland over the past year.’
The Pound’s advance comes despite French President Francois Hollande claiming that the UK cannot retain any of the benefits of EU membership once it has left the Union.
GBP NZD Exchange Rate Forecast; Spring Budget and Friday Slew Highlights in UK Calendar
Chancellor Philip Hammond will deliver his Spring Budget on Wednesday. He has already claimed there will be no ‘spending sprees’ in this budget, but economists and markets will nonetheless want to see what his plans are for propping up the economy after Article 50 is triggered.
After that, the calendar is set to remain quiet until Friday when a glut of data, including industry production figures and the latest trade reports, will be published.
The New Zealand Dollar, meanwhile, will have to contend with the outcome of tomorrow’s dairy auction, Wednesday’s Chinese trade figures and Thursday’s Chinese consumer price data.