GBP/NZD up 0.5% as UK Economic Outlook Brightens
UPDATE 13:35 BST: The Pound Sterling New Zealand Dollar (GBP/NZD) exchange rate continues to strengthen this afternoon as the outlook for the UK economy is brightened by the latest PMI figures.
The data indicates a rebound in the second quarter looks increasingly likely, bolstering optimism that the Bank of England (BoE) could still raise interest rates later this year and lifting Sterling sentiment.
Meanwhile the New Zealand Dollar(NZD) is falling back this afternoon as investors shy away from the high-yield currency ahead of the release of the US Non-manufacturing PMI.
GBP/NZD Exchange Rate Strikes Four-Month Low amid Rising Geopolitical Uncertainty
The Pound New Zealand Dollar (GBP/NZD) exchange rate was hit by heavy losses during last week’s session as ongoing Brexit uncertainty and sliding house prices weighed on Sterling sentiment.
However the Pound was able to mount a comeback at the end of the week as May’s stronger-than-expected Manufacturing PMI brought some much-needed relief to Sterling.
Meanwhile the New Zealand Dollar (NZD) surged higher in the middle of last week’s session as comments from the Reserve Bank of New Zealand (RBNZ) were seen as broadly optimistic.
The ‘Kiwi’s failed to hold its ground in the latter half of the week however as the US government’s decision to move forward with its steel trade tariffs, reignited fears of a global trade war, prompting the trade-sensitive NZD to falter.
Pound Sterling (GBP) Exchange Rate Rallies on Upbeat Services PMI
While the Pound Sterling (GBP) exchange rate got off to another slow start this week, the release of the UK’s latest Services PMI appears to have put the currency back on the road to recovery.
According to data published by IHS Markit on Tuesday, activity in the UK’s service sector surged higher than expected in May, with the index jumping from 52.8 to 54.0, against forecasts of a more modest rise to 53.0.
With the UK’s service sector accounting for over 80% of the GDP this jump was seen as broadly positive for the Pound, especially as it bolsters hopes the Bank of England (BoE) could still target a rate hike in 2018.
Chris Williamson, Chief Business Economist at IHS Markit, said:
‘The signs of economic growth rebounding in the second quarter will likely up the odds of the Bank of England hiking interest rates again in coming months, likely August.’
New Zealand Dollar (NZD) Exchange Rate Buoyed by Risk Sentiment
At the same time the New Zealand Dollar (NZD) found its losses trimmed this morning thanks to improving global risk sentiment.
This rise in risk appetite has largely been driven by fading political concerns in Italy as well as a weakened US Dollar (USD), which has driven investors to seek out higher yielding currencies such as the ‘Kiwi’.
However with the prospect of a US led trade war still hanging over NZD, it struggled to completely offset the Pound’s advance on Tuesday morning.
GBP/NZD Exchange Rate Forecast: BoE Outlook to Remain Cautious in Light of Recent UK Data?
Looking ahead the GBP/NZD exchange rate may continue to trend lower this week in reaction to a number of speeches by members of the Bank of England’s (BoE) Monetary Policy Committee (MPC).
Economists expect May’s run of lacklustre UK economic data will prompt policymakers to remain fairly dovish in their outlook for monetary policy for the remainder of the year, with the Pound (GBP) likely to weaken as the prospects of a 2018 rate hike fade.
Meanwhile the New Zealand Dollar (NZD) could see some gains in the first half of the week, should prices continue to rise following the latest Global Dairy Auction.
With dairy products accounting for roughly 20% of New Zealand’s total exports, the ‘Kiwi’ can see considerable movement depending on which way prices trend at the fortnightly auction.