Underwhelming UK Manufacturing Keeps Pressure on Pound to New Zealand Dollar Exchange Rate
Recent volatility in the Pound to New Zealand Dollar (GBP/NZD) exchange rate continued in the first full trade session of 2018, as the first notable UK data of the year failed to inspire any fresh strength in Sterling.
Tuesday morning saw the publication of Britain’s December manufacturing PMI, from Markit. The print was forecast to slip from 58.2 to around 58, but instead fell to 56.3.
Despite analysts noting that this fall had essentially reversed November’s strong gain, the report was generally well received by economists. According to Malcolm Barr from JPMorgan;
‘While the easiest story to tell on manufacturing strength is that it is a by-product of exchange rate weakness and the strength of the expansion abroad, it remains the case that this is not obvious from the PMI data itself: the new export orders reading is running slightly below that for new orders as a whole.’
Overall, the data indicated that Britain’s manufacturing sector was strong but the slightly worse-than-expected results limited the British Pound’s (GBP) strength.
New Zealand Dollar (NZD) Exchange Rates Supported by Rising Dairy Prices
Prices of dairy, New Zealand’s most lucrative commodity, rose at the beginning of the year according to news from the latest Global Dairy Trade (GDT) auction.
After a poor performance from dairy prices in the second half of 2017, especially in November and December, prices of the commodity jumped by 2.2% on the 2nd of January. This marked the biggest rise in dairy prices since May 2017.
The news helped the New Zealand Dollar (NZD) hold its ground against Sterling on Tuesday afternoon.
GBP/NZD continues to trend far below the highs seen in early December and has yet to recover far from last week’s interbank one-month-low of 1.89.
Pound to New Zealand Dollar Exchange Rate Forecast: UK Services Data in Focus
New Zealand’s economic calendar will be relatively empty in the coming sessions, with the next notable dataset for the nation not due until the 11th.
As a result, it’s likely that Sterling, shifts in risk-sentiment and fluctuations in commodity prices, will be driving Pound to New Zealand Dollar exchange rate movement for most of the next week.
Meanwhile, the British currency could be influenced by Wednesday’s UK construction PMI for December and Thursday’s UK services PMI from Markit.
As the services sector makes up a considerable portion of Britain’s Gross Domestic Product (GDP), the Pound outlook could improve if the report beats expectations. Analysts currently expect that the services index will have improved from 53.8 to 54.1 in December.
If the data doesn’t surprise investors much however, it’s likely that the focus of Pound trade will return to Brexit developments, particularly with UK Parliament set to reconvene next week.