Pound Sterling New Zealand Dollar (GBP/NZD) Exchange Rate Falls despite PMI Hitting Nine-Month High
The Pound Sterling New Zealand Dollar (GBP/NZD) exchange rate slumped by around -1%, leaving the pairing trading at around NZ$2.0212.
Sterling plummeted on Monday despite data showing the UK manufacturing PMI edging up to a nine-month high.
New orders, business confidence, and employment all increased in January, causing the PMI to rise to a neutral 50.
However, new export orders fell for a third consecutive month. GBP also fell as companies said there was weak economic growth in key markets, such as Europe.
Commenting on this morning’s data, Director at IHS Markit, Rob Dobson said:
‘The start of 2020 saw the performance of the UK manufacturing sector stabilise, as receding levels of political uncertainty following the general election aided mild recoveries in new order intakes, employment and business confidence.
‘A strengthened domestic market was the main source of new business. Overseas demand remained disappointing, however, as new export business fell for the third straight month in response to weak economic growth in key markets, notably European.’
New Zealand Dollar (NZD) Rises despite Risk-Off Mood
The ‘Kiwi’ slipped against the Pound despite the ongoing worry about the spread of Wuhan coronavirus and the economic effect of this.
The number of confirmed cases in China jumped to 17,000, with 361 deaths in mainland China, and one death in the Philippines.
Commenting on this, Kiwibank dealer, Mike Shirley said:
‘It’s been an exciting day as far as headlines are concerned […] it’s all caught up in the global risk-off mood.’
He also added that the market is currently plagued by uncertainty and added:
‘It’s probably compounded by the fact that very few of those trading in the markets have a deep understanding of the spread of infection. You’re really trading on the unknown.
‘If it was economic or data, that’s in the wheelhouse. We continue to watch and wait and worry.’
Sterling (GBP) Slumps as Johnson Threatens to Walk Away From UK-EU Talks
The Pound plummeted at the start of the week as markets awaited Prime Minister Boris Johnson to give a speech in which he is expected to threaten to walk away from talks if a deal cannot be struck.
The Prime Minister has already stated that there is ‘no need’ for the UK to follow the European Union’s rule.
Johnson is expected to say:
‘There is no need for a free trade agreement to involve accepting EU rules.
‘We have made our choice: we want a free trade agreement, similar to Canada’s […] The choice is emphatically not ‘deal or no-deal’. The question is whether we agree a trading relationship with the EU comparable to Canada’s – or more like Australia’s.’
Pound New Zealand Outlook: Will GBP Regain Today’s Losses?
Looking ahead, the New Zealand Dollar (NZD) could slump against the Pound (GBP) following the release of December’s building permits data.
If the number of building permits falls further than expected, ‘Kiwi’ sentiment could fall.
Meanwhile, a dovish Reserve Bank of Australia (RBA) decision could leave the New Zealand Dollar under pressure.
Sterling could regain some of today’s losses following the release of January’s construction PMI.
If construction activity in the UK increases more than expected at the start of 2020, the Pound New Zealand Dollar (GBP/NZD) will rise.