Solid UK PMI Readings Shore up GBP/NZD Exchange Rate

The relative strength of the latest UK services and construction PMI readings kept the GBP/NZD exchange rate trending higher, in spite of labour market worries.

Last Week: Signs of Improving NZ Business Confidence Fail to Boost New Zealand Dollar

Although September’s ANZ business confidence index showed a surprise uptick on the month this failed to offer the New Zealand Dollar any particular boost.

As news of Donald Trump’s Covid-19 diagnosis prompted an initial bout of risk-off trade NZD exchange rates came under further pressure heading into the weekend.

While worries over the outlook of the UK labour market continued to mount the Pound held onto a stronger footing against its rival.

A positive revision to the UK services PMI for September helped to keep a floor under the GBP/NZD exchange rate, even as the report showed a seventh consecutive month of job losses for the sector.

Three Things to Watch out for This Week

1. NZIER Business Confidence Index

While the NZIER business confidence index looks set to remain in negative territory in the third quarter forecasts still point towards a modest improvement on the quarter.

As long as sentiment shows signs of moving in the right direction this should offer the New Zealand Dollar a boost in the short term.

2. UK Balance of Trade

A narrowing of the UK trade surplus could put renewed pressure on GBP exchange rates, given the lingering uncertainty over the UK’s future trade relationships.

Even so, if the trade balance remains in a state of surplus the downside potential of the Pound could still prove limited.

3. UK Gross Domestic Product

Further GBP/NZD exchange rate jitters look likely on the back of August’s UK gross domestic product data.

If the UK economy shows solid growth on the month this may help to ease underlying worries over the strength of the economic outlook, even if the monthly rate slows a little from July’s reading.

GBP/NZD Outlook

As long as the UK economy can demonstrate fresh signs of resilience in its latest GDP data the GBP/NZD exchange rate should hold onto a positive footing.

Louisa Heath

Contact Louisa Heath


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