Over the course of last week the Pound shed a couple of cents against the New Zealand Dollar as poor UK growth data caused the British currency to broadly weaken.
Sterling has extended losses so far this week, with GBP/NZD dropping -0.3%.
Fresh Pound declines occurred after Markit’s latest manufacturing PMI gauge revealed a greater-than-expected slowdown in the sector.
The dip in the manufacturing index from 56.7 points to 55.9 has concerned traders as it could lead to reduced business investment in the UK.
Offering a cautious take was Kathleen Brooks of City Index;
‘We expect the rest of the surveys to also show signs of moderation as the UK economy enters a period of slow cooling rather than falling off a cliff’.
New Zealand Dollar Appreciates after Post-Election Slump
Although there is continued uncertainty about the composition of the next NZ government, the New Zealand Dollar has still recovered some of its election-related losses, with early coalition talks finally beginning this week.
The country has been without an effective government since the NZ election in late September, with both major parties (the Nationals and Labour) trying to win the support of the third largest party, New Zealand First.
While considered populist and anti-immigration, NZ First’s vote share means that it will be part of the next government by necessity.
NZ First leader Winston Peters is keeping his cards close to his chest, claiming that he will not commit to either party until after the final tally on October 7th.
Before then, both Labour and National officials are likely to be involved in a close-fought struggle to win Peters’ favour.
UK PMIs to Impact GBP/NZD Exchange Rate
This week, Pound/New Zealand Dollar exchange rate movement may follow the publication of the remaining UK PMI measures, focused on the construction and services sectors.
These are predicted to show falling construction sector activity but no change in services activity.
The services sector result is the most important of these as services contributes over 70% to total GDP.
A surprise rise for the services sector could boost the Pound.
NZ data to watch out for this week includes the nation’s business confidence index for the third quarter and the global dairy trade price index on Tuesday.
Rising dairy prices would be New Zealand Dollar-supportive.