Pound New Zealand Dollar (GBP/NZD) Exchange Rate Rallies on Soaring UK Economic Growth
The Pound New Zealand Dollar (GBP/NZD) exchange rate is rallying this morning, following the release of the latest PMI flashes for the UK.
With the UK economy seen to be growing at the fastest rate in months, GBP/NZD is trading at around NZ$2.0213. This indicates a rise of roughly 0.4% from today’s opening rates.
Pound (GBP) Mixed despite Soaring Economic Growth
The Pound (GBP) is seeing mixed trade this morning, following the release of the latest private sector indexes.
While the manufacturing sector index pointed to further contractions in April, the service sector index printed above expectations.
Dr John Glen, CIPS Chief Economist, commented:
‘The fastest rebound in private sector output in a year showed businesses were enjoying the pockets of recovery emerging in the UK economy and activity levels leapt up as a result of new orders and improved supply chain performance.’
However, the tailwinds from this upbeat release may be being tempered by a sharp drop in retail sales. Initially forecast to fall by 0.5% in March, retail sales fell by 0.9% on a monthly basis.
This weakness in the vital sector could be undermining strength from a resilient economy. As such, it creates a difficult path for the Bank of England (BoE) to move forward with further tightening. While economic growth is accelerating at the fastest pace in months, the UK’s retail sector is feeling the strain.
New Zealand Dollar (NZD) Weakens as Post Inflation Sell-Off Continues
The New Zealand Dollar (NZD) is weakening this morning, as the sell-off momentum continues. With inflation cooling below expectations, the hawkish stance of the Reserve Bank of New Zealand (RBNZ) has come under scrutiny.
Because of this, investors are continuing to pare back their bets on further interest rate hikes from the RBNZ.
Elsewhere, a mixed market mood is likely weighing on the risk-sensitive ‘Kiwi’. The prospect of further tightening from the Federal Reserve is increasing. As such markets are concerned over the impact this could have on the global economy.
With this attitude in mind, investors are shying away from riskier investments, leaving the ‘Kiwi’ behind.
GBP/NZD Exchange Rate Forecast: CBI Data to Dent GBP?
Looking ahead to early next week for the Pound, a duo of data releases from the Confederation of British Industry (CBI) may prompt movement.
On Tuesday, the latest business optimism index for Q2 is due to print. This is forecast to fall from -5 to -15, which may weigh on Sterling. As it reflects businesses sentiment towards future trade, the increase in pessimism may indicate a weakening economy.
This is then followed by the latest industrial trends orders. With UK factory orders potentially falling, this could dampen GBP.
For the New Zealand Dollar, the core driver of movement could come from the latest balance of trade figures. A modest decrease in the trade deficit could bring cheer to NZD investors, due to the New Zealand economy’s reliance on exports.