Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Rises on Optimistic PMI Forecasts

Business Optimism despite Tough UK Conditions Triggers GBP/NZD Exchange Rate Gains

The Pound (GBP) has continued to advance against the New Zealand Dollar (NZD) today, thanks to reports of British business confidence.

A Lloyds Bank survey has shown that over half of responding UK businesses are more optimistic about the economy now than at the start of 2018.

Considering how this optimism could benefit the Pound in the future, Lloyds Commercial Banking Senior Economist Hann-Ju Ho said;

‘The uplift in economic optimism this month…is a positive move and may well be reflected in Sterling returning to pre-Brexit levels against the [US] Dollar’.

GBP/NZD Exchange Rate Advances on Hopes of Accelerating UK PMI Activity

The Pound (GBP) fell sharply against the New Zealand Dollar (NZD) last week, but has started to regain lost ground today.

Initial losses were caused by gloomy UK GDP growth figures for Q1 2018, but the recent advance comes on hopes that upcoming PMI readings will show rising activity.

This week’s PMI stats will have special significant because of the recent GDP estimates; if it looks like Q2 will get off to a strong start then the Pound is likely to rally.

The data comes at a time of wider uncertainty among Pound traders, some of whom are concerned that the UK economy could be stuck in a low gear until the 2020’s.

Falling NZ Business Confidence Drags down New Zealand Dollar to Pound Exchange Rate (NZD/GBP)

Although the Pound (GBP) has struggled today due to lingering pessimism, the New Zealand Dollar (NZD) has been devalued by some domestic data.

The ANZ business confidence reading has shown another drop in sentiment levels, from -20 points in March to -23.4 in April.

This has led to the New Zealand Dollar declining against the Pound, as well as posting losses against other peers like the US Dollar.

This drop in business confidence follows a similar decline in consumer confidence levels and reflects more challenging conditions across the NZ economy.

Considering the implications of the data, ANZ New Zealand Chief Economist Sharon Zollner stated:

‘Our composite growth indicator has now dipped to around 2% year-on-year growth.

‘We think the economy has more in the tank to keep growth above that, but with consumer confidence dipping and business growth indicators still languishing, it won’t necessarily be … smooth sailing.’

GBP/NZD Exchange Rate could Advance on UK Construction and Services Sector Growth

This week, GBP/NZD exchange rate movement may be caused by UK manufacturing, construction and services sector PMI figures for April.

The data will respectively come out on 1st, 2nd and 3rd May. The manufacturing PMI could cause a GBP/NZD exchange rate decline, as slowing activity is expected.

More support could come from the construction and services sector readings, both of which are predicted to show greater economic activity.

In particular, the construction sector is expected to show a recovery to 50.9 in April, after contracting to 47 points in March.

A contracting construction sector was largely blamed for the poor Q1 UK GDP estimates seen last week, so a recovery might reassure Pound traders and raise confidence.

As always, the services sector reading remains the most important of the three and if it shows above-forecast growth then the Pound could rally.

This week’s main NZ data releases will all come out tomorrow; first up will be the afternoon’s Global Dairy Trade price index.

This measures changes to global dairy prices and could trigger an NZD/GBP advance if it shows rising costs.

Further ahead, there may be additional NZD/GBP exchange rate gains during the evening if the Q1 unemployment rate reading shows an unexpected reduction.

Adam Solomon

Adam joined the team at TorFX soon after graduating from University in 2005 with a degree in Journalism. Since then Adam has advanced to become both Head of Trading and Head of Treasury. His keen interest in the currency market and knowledge of what drives exchange rates makes him perfectly positioned to produce regular market updates focused on the movements of the major currencies.

Contact Adam Solomon