Despite a solid UK manufacturing PMI on Tuesday, the Pound to New Zealand Dollar exchange rate has been unable to return to last week’s multi-month highs following Monday’s losses. GBP/NZD had previously achieved its best rate since July 2016, briefly breeching 1.87 before returning to trade at 1.86.
Pound (GBP) Supported by UK Manufacturing Data
The Pound to New Zealand Dollar exchange rate plunged on Monday as investors sold the Pound amid increased Brexit concerns.
Over the bank holiday weekend, rumours that a recent meeting between UK Prime Minister Theresa May and European Commission leader Jean-Claude Juncker had gone very poorly were sparked by a German newspaper.
According to the report from Frankfurter Allgemeine Sonntagszeitung, Juncker told May that he was ‘leaving Downing Street 10 times more sceptical’ than he was before.
Despite statements from May and Downing Street on Monday attempting to quell the rumours as ‘Brussels gossip’, the report left the Pound much weaker on Monday.
Sterling demand improved on Tuesday however, as April’s UK manufacturing PMI from Markit came in better than expected. Manufacturing was predicted to slip from 54.2 to 54, but instead improved to 57.3.
This bolstered hopes of the UK economy remaining resilient in the second quarter and strengthened the Pound.
New Zealand Dollar (NZD) Benefits from NZ Data Speculation
Risk-sentiment was poor for most of April, leaving risky commodity-correlated currencies like the New Zealand Dollar much weaker.
Last week saw the ‘Kiwi’ slump when the US Trump administration appeared to come down harder on US trade deals, increasing concerns that New Zealand’s dairy trade could also be negatively impacted.
This week the New Zealand Dollar has recovered from its worst levels on hopes this week’s New Zealand news will impress.
GBP/NZD Forecast: NZ Jobs Data and UK PMIs in Focus
Wednesday’s Asian session will see the publication of New Zealand’s highly anticipated Q1 2017 employment stats.
Investors are expecting New Zealand’s labour market to have been steady throughout the quarter and to have kept an employment change pace of around 0.8%.
If NZ employment beats expectations, the ‘Kiwi’ could push GBP/NZD lower as hopes of a more optimistic tone from the Reserve Bank of New Zealand (RBNZ) next week increase.
NZD traders will also be reacting to May’s first Global Dairy Trade (GDT) auction during Wednesday’s Asian session.
Britain’s April PMIs from Markit remain a big focus of GBP trade this week, though Brexit concerns have weighed on PMI excitement slightly.
Wednesday will see the publication of Britain’s construction PMI and the highly influential services PMI will be published on Thursday.
Services beating expectations may be the best chance of GBP/NZD recovering losses.
However, lower-than-expected services data will exacerbate UK growth fears and could leave the Pound to New Zealand Dollar exchange rate weaker.