Pound New Zealand Dollar (GBP/NZD) exchange rate climbs as Kiwi support slackens

GBP/NZD exchange rate firms on weaker New Zealand Dollar

The Pound New Zealand Dollar (GBP/NZD) exchange rate is trending up today despite a strong clutch of data from Australia yesterday. Likely subduing the New Zealand Dollar (NZD) during this morning’s Asian session was a weaker-than-expected Chinese services PMI.

At the time of writing, GBP/NZD is trading at NZ$2.0854, having fallen by more than 0.2% in the past 24 hours.

New Zealand Dollar (NZD) faces headwinds as Chinese data disappoints

The New Zealand Dollar is tumbling against its peers today, most likely depressed by the latest services PMI from China. Strong Australian data may have helped cap losses for the currency yesterday, given the positive correlation between the Australian Dollar (AUD) and NZD.

Today, however, markets are concerned by a slowdown in growth in China’s service sector. February’s PMI was forecast to rise to 53.4 but instead dropped to 52.5 as new order growth remained slower than the 2023 average.

Optimistic rhetoric from Chinese officials has so far been insufficient to prevent ‘Kiwi’ losses: Chinese Premier Li Qiang set a GDP growth target of 5% during this morning’s Asian session. Part of the reason for Mr Qiang’s announcement having limited impact may be deprioritisation of growth, according to macroeconomic forecasting firm Enodo Economics:

‘The GDP goal has decreased in importance in recent years… [China’s leader, Xi Jinping] has de-emphasised growth – and therefore the importance of the GDP goal – in favour of ironing out the structural issues he believes undermine overall economic security.’

Also weighing upon the New Zealand Dollar today is widespread risk-off sentiment. US stock index futures are down, indicating a cautious market mood as fresh economic data from the US and the Eurozone is assessed.

Pound (GBP) trades cautiously higher ahead of Spring Budget

The Pound (GBP) is trending up against several peers today despite uncertainty ahead of tomorrow’s UK Spring Budget.

Chancellor Jeremy Hunt’s package of measures is likely to have implications for central bank expectations, as smaller-than-hoped-for tax cuts could escalate bets of early interest rate cuts. At present, the Bank of England’s (BoE) stance is hawkish compared with other central banks, given the state of UK inflation.

On the other hand, the budget may be Sterling-positive. Some experts are hopeful it could help lift the UK out of its long cost-of-living crisis, as current forecasts suggest the Chancellor will cut National Insurance contributions by 2p.

Newspapers report that the move would save the average worker £450 – a welcome support as many households still struggle with financial hardship. Reassuring the public, Hunt said over the weekend that he will only cut taxes in a responsible and ‘prudent’ way.

Yet the government’s plan to free up the funds for tax cuts may involve ending ‘non-dom’ status – a controversial Labour policy that would see foreign nationals in Britain having to pay tax on overseas earnings. The Institute for Fiscal Studies warns that such a move risks driving wealthy businesspeople out of the country: yet another difficult decision for the Chancellor.

GBP/NZD exchange rate forecast: US data to drive movement?

The Pound New Zealand Dollar exchange rate may trade later today according to data from the USA, given the role of the US economy in dictating currency market dynamics.

If factory orders drop and the latest ISM services PMI reports a slowdown in growth, the signs of a struggling global economy may deepen risk-off sentiment. A bearish mood would be likely to compound losses for the New Zealand Dollar, sending GBP/NZD higher but possibly denting the Pound in exchange rates against perceived-safer currencies.

As the overnight session begins, data from Australia may subsequently influence GBP/NZD. The Ai group industry index is forecast to climb from –27.3 to –22; if the release prints as expected, the Australian Dollar may climb, potentially buoying the ‘Kiwi’.

Olivia Evershed

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