UK PMI Surveys Leave Pound New Zealand Dollar (GBP/NZD) Exchange Rate Flat

Pound Sterling New Zealand Dollar (GBP/NZD) Exchange Rate Muted as 2020 Starts on ‘Positive Note’

The Pound Sterling New Zealand Dollar (GBP/NZD) exchange rate remained muted on Friday after the release of UK PMI data, leaving the pairing trading at around NZ$1.9822.

Sterling sentiment received a boost after data showed the UK private sector returned to growth, expanding for the first time in five months.

The UK flash PMI composite rose to 52.4 from December’s disappointing reading of 49.3.

Growth in both the UK manufacturing and service sectors could prompt the Bank of England (BoE) to leave rates unchanged next week.

Commenting on this morning’s data release, Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply said:

‘January saw market conditions starting to build, as revitalized supply chain managers in the manufacturing and services sectors reported the highest growth of new orders since September 2018. It appears that once uncertainty around the General Election was removed, domestic clients and consumers started to spend again, though exports in the service sector still suffered from indecision and a Brexit block.

‘2020 has started on a positive note with this sudden change in momentum. However, that’s where the story will end until this uncorked trickle of new orders and activity turns into a flood for businesses hit by hesitancy in the last three years. Business activity will need to be buoyed up by the prospect of strong negotiations around the UK’s exit from the EU to return them to strength in the years to come.’

New Zealand Dollar (NZD) Flat as Virus Feats Spread

The ‘Kiwi’ remained flat after the World Health Organization (WHO) stated that it was ‘a bit too early’ to declare the new coronavirus a global health emergency.

This provided markets with a sense of relief and stopped the risk-sensitive New Zealand Dollar from sliding against the Pound.

However, many investors are still anxious as the Wuhan virus has killed 26 people in China and reports suggest more than 800 people are infected.

Commenting on this, Barclays’ senior FX strategist, Shinichiro Kadota said:

‘The Lunar New Year holiday in China has just begun and they say the virus could be latent for about a week. So at least for the next couple of weeks it will be difficult to gauge how much the new disease will have spread.’

New Zealand Dollar (NZD) Muted despite NZ Inflation

At the start of today’s session, data revealed that New Zealand inflation accelerated more than expected in the final quarter of 2019.

This means the country’s inflation rate closed the year within the middle of the Reserve Bank of New Zealand’s (RBNZ) target range.

The Consumer Price Index (CPI) rose by 1.9% compared to a year earlier, rising from 1.5% in the previous quarter.

While it is expected the bank’s target will be hit this year, some have argued this could be temporary.

Commenting on this, Jarrod Kerr, Kiwibank Chief Economist said:

‘We’re still skeptical inflation will average 2% over the medium term, just as inflation fell well short of the RBNZ’s target midpoint over the last ‘medium’ term. In order to maintain momentum into 2021, we suspect the RBNZ will cut the cash rate once more.’

Pound New Zealand Dollar Outlook: Bank of England in Focus

Looking ahead, the Pound (GBP) could rise against the New Zealand Dollar (NZD) as next week’s Bank of England (BoE) meeting approaches.

As the bank seems unlikely to slash rates during its January monetary policy meeting, thanks to better-than-expected UK PMI data, the Pound Sterling New Zealand Dollar (GBP/NZD) exchange rate is likely to edge higher.

Millie Empson

Contact Millie Empson