Pound New Zealand Dollar (GBP/NZD) Exchange Rate Surges on Downbeat NZ Business Outlook

June 1, 2018 – Written by John Cameron

Pound Sterling New Zealand Dollar (GBP/NZD) Exchange Rate Climbs on Acceleration in UK Manufacturing

The Pound New Zealand Dollar (GBP/NZD) exchange rate ended this week on solid form, rising as investors responded to an upbeat UK manufacturing activity report and a gloomy outlook in the latest New Zealand business activity report.

Markit’s latest UK manufacturing PMI printed higher at 55.4 in May, beating the previous period’s 53.9 and the market forecast of 53.5.

This rise was largely due to a marked rise in output growth, but this news was unfortunately sullied by an accompanying slowdown in expected sales and new order inflows – both of which could prove problematic in the long run.

Markit’s Robert Dobson shared his thoughts on the results:

‘A slowdown in new order inflows meant the expansion in product was achieved only by firms working through their backlogs of work. These prices and supply headwinds, combined with a further slowdown in new order growth could jeopardise any further expansion in the manufacturing sector’.

This didn’t limit GBP/NZD in the long-run, however, with investors also seeming to favour the Pound in light of the US trade tariff news against the EU, Mexico and Canada.

New Zealand Business Outlook Darkens – New Zealand Dollar (NZD) Exchange Rates Fall

Data from New Zealand today was rather poor, with a surprising fall in New Zealand business optimism hurting the ‘Kiwi’ Dollar.

According to the ANZ activity outlook survey, business optimism fell to a score of 13.6% in May, down from the previous period’s score of 17.8% and missing market forecasts.

This was largely due to ongoing struggles within the construction sector, which saw its own activity falling alongside profitability expectations.

‘The construction industry is clearly facing significant challenges, ’ANZ Chief Economist Sharon Zollner said in a statement.

US Trade Tariffs Curb Market Risk Appetite – What can we Expect for the Pound New Zealand Dollar (GBP/NZD) Exchange Rate?

Looking ahead, the Pound New Zealand Dollar (GBP/NZD) exchange rate could extend its gains next week as long as risk appetite amongst the markets remains high.

Whilst New Zealand is exempt from the proposed US tariff measures on steel and aluminium, investors are still slightly concerned that the responses from the EU and other superpowers will provoke a tit-for-tat retaliation – thus encouraging greater protectionist measures and potentially harming the riskier currencies like NZD.

In this regard, investors will be watching the responses next week from Canada, the EU and Mexico, though it should be stressed; if the EU wishes to go through the World Trade Organisation (WTO) then their tariff measures will take some time to come into effect.

Any sign of deteriorating global trade could continue to harm the ‘Kiwi’ Dollar.

In other news, investors will be assessing the global dairy trade auction result, also due next week.

If dairy prices rise then we could see the New Zealand Dollar find some support.

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TAGS: Pound New Zealand Dollar Forecasts