The Pound was able to remain in the region of a three-week high against the New Zealand Dollar on Monday despite the release of weaker than forecast UK manufacturing data.
Pound Unsettled by Three-Month Low UK Manufacturing PMI
After rallying last week on the back of Bank of England (BoE) rate hike expectations, the Pound’s bullish attitude faltered slightly on Monday following the release of disappointing UK data.
The June UK manufacturing PMI (which measures activity in the sector) fell to a three-month low, with export growth being at its lowest level in five months.
The PMI eased from 56.3 points to 54.3, staying above the 50 barrier separating growth from contraction but marking a sharper deceleration in output than expected.
Markit’s Senior Economist Rob Dobson said of the data;
‘New business rose at the weakest pace for nearly a year and growth was down sharply from April’s near three-year high.
This slowdown was largely centred on the domestic market, where increased business uncertainty appears to have led to some delays in placing new contracts.
While the survey data adds to signs that the economy is likely to have shown stronger growth in the second quarter, further doubts are raised as to whether this performance can be sustained into the second half of the year’.
New Zealand Dollar Sturdy on USD Weakness
The New Zealand Dollar, meanwhile, has been benefitting from weakness in the US Dollar.
With the International Monetary Fund (IMF) recently slashing its US growth forecasts and expressing concerns that President Donald Trump will have the uplifting impact on the US economy initially expected, the US Dollar has been struggling against the other majors.
Higher-risk currencies like the Australian Dollar and New Zealand Dollar have also been in greater demand as bets that the Federal Reserve will increase interest rates for a third time in 2017 remain tepid.
GBP/NZD Could Fall on Weak Services PMI
This week, the Pound/New Zealand Dollar exchange rate could decline if the UK’s construction and services PMIs also disappoint forecasts.
The services PMI result will be more influential of the two, as the services sector is the largest contributor to UK GDP.
The last UK news will be Friday’s trade balance figure for May. If the -2.05bn deficit recorded in April expands then the Pound could end the week on a bad note.
As data from New Zealand is in fairly short supply, NZD exchange rate movement is more likely to occur in response to changes in risk appetite and global economic developments.