Pound New Zealand Dollar (GBP/NZD) Exchange Rate Wavers amid Upbeat Market Mood

Pound New Zealand Dollar (GBP/NZD) Fluctuates as Market Sentiment Remains Upbeat

The Pound New Zealand Dollar (GBP/NZD) exchange rate is trading narrowly as a buoyant market mood was met with growing business optimism.

At time of writing, the GBP/NZD exchange rate is around $2.1317, relatively unchanged from this morning’s opening levels.

Pound (GBP) Quiet amid Modestly Improving Business Confidence

The Pound (GBP) is fairly subdued this morning amid a lack of major economic data. An upbeat mood and improving business morale could be keeping Sterling afloat.

Elevated interest rate hike bets could also be keeping the Pound supported. Markets are expecting the Bank of England (BoE) to raise interest rates for the 15th consecutive time next month. BoE Chief Economist Huw Pill said this morning that the central bank will ‘see the job through‘. The BoE is adamant in bringing inflation back down to 2%, adding:

‘The key element is that we on the MPC (Monetary Policy Committee) need to see the job through and ensure a lasting and sustainable return of inflation to the 2% target.’

‘At present, the emphasis is still on ensuring that we are – in the words of the MPC’s last statement – sufficiently restrictive for sufficiently long to ensure that we have that lasting return to target.’

Elsewhere, the Lloyds Business Barometer survey reported companies in the UK were at their highest confidence level since February 2022. Hopes of the BoE finally drawing close to a peak in interest rate hikes has buoyed firms’ optimism. The Pound could climb higher on improving optimism surrounding the stuttering economy.

New Zealand Dollar (NZD) Undermined by Mixed Chinese Data

Meanwhile, the New Zealand Dollar (NZD) is trading without a clear direction this morning amid a flurry of economic data. Mixed Chinese data and improving New Zealand business confidence pulled the ’Kiwi’ in different directions in the overnight session.

NBS manufacturing PMI in China edged slightly higher to 49.7 in August as non-manufacturing disappointed to 51. Despite remaining in contraction territory for the fifth straight month, the crucial factory sector rose to just below the 50 mark. However, despite the slight improvement, the reading did little to ease concerns of the worsening economic climate in the world’s second-largest economy. But Robert Carnell, economist at ING, was more optimistic about the readings:

‘Looking at the components underlying both series and starting with the manufacturing series: the latest data show an improvement in production to a point which actually points to expansion. Total orders have improved to hit the 50 threshold signalling that contraction has ended.’

Domestically, business confidence improved substantially but missed forecasts. Expectations of a significant improvement from -13.1 to -1.9 were met with a slightly lower-than-expected -3.7. However, it still pointed to the highest level of morale since June 2021, despite the 26th consecutive month of negative readings.

Pound New Zealand Dollar Exchange Rate Forecast: Slumping UK Manufacturing Sector to Dent Sterling?

Looking ahead, the Pound New Zealand Dollar exchange rate could see further movement with the final reading for UK manufacturing PMI. If the preliminary figure of 42.5 is confirmed, it would point to a 13th consecutive month of contracting activity.

Meanwhile, without any data to go by, the risk-sensitive New Zealand Dollar will be left to trade on market sentiment. If moods sour on global growth fears, the ‘Kiwi’ could be under pressure.

Danny Tingle

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