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GBP NZD Exchange Rate Trends Higher Despite Slowing UK Services PMI

June 5, 2017 - Written by Frank Davies

May’s UK services PMI proved a disappointing start to the week, although not enough to prevent the Pound New Zealand Dollar exchange rate holding onto a modest uptrend.

While the index slowed from 55.8 to 53.8 the sector nevertheless remains in a solid state of growth, even though political uncertainty has weighed on growth in recent weeks.

Election jitters look set to increasingly drag on Sterling with the campaign now in its final days, particularly as opinion polls continue to suggest a narrowing Conservative lead over Labour.

Analysts at Lloyds Bank noted:

‘Polls over the weekend, conducted before the attacks, continue to show a wide variation in leads for the Conservatives, ranging from 12 points in a ComRes poll to only a 1-pont lead in a Survation poll. The FT’s poll of polls puts the Conservatives at 44% and Labour at 36%, confirming a narrowing of the gap since the election was called.’


If the odds of the Tories returning to power with an increased majority continue to fall the appeal of the Pound is likely to weaken further.

The GBP NZD exchange rate looks set to experience a fresh bout of volatility ahead of the weekend, regardless of the outcome of the election.

Attention should be quick to turn back towards the issue of Brexit and the impending start to negotiations with EU officials.

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As long as signs continue to point towards the government pursuing a harder form of Brexit the appeal of the Pound is likely to remain limited, particularly if the economy shows further evidence of slowness.

In the absence of any fresh New Zealand data the mood towards the antipodean currency remained rather bearish, despite a general improvement in market risk appetite.

Thanks to a local bank holiday support for the New Zealand Dollar was relatively limited at the start of the week, offering its rivals an opportunity to make some fresh gains.

Tuesday’s GlobalDairyTrade auction could offer NZD exchange rates a rallying point, however, if prices are found to have risen for a sixth consecutive event.

Signs of a strengthening dairy sector could encourage greater confidence in the outlook of the wider New Zealand economy, especially if the latest ANZ commodity price index proves positive.

On the other hand, any weakening in prices could encourage investors to pile out of the New Zealand Dollar.

If US data continues to disappoint this may discourage bets that the Federal Reserve will pursue a more aggressive pace of monetary tightening, limiting the strength of the US Dollar and reducing pressure on commodity-correlated currencies.

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TAGS: Pound New Zealand Dollar Forecasts

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