Pound New Zealand Dollar (GBP/NZD) Exchange Rate Steady, Brexit Weighs on UK Services Sector

November 5, 2019 - Written by John Cameron

STORY LINK Pound New Zealand Dollar (GBP/NZD) Exchange Rate Steady, Brexit Weighs on UK Services Sector

GBP/NZD Exchange Rate Flat, UK Services Struggles in October

The Pound New Zealand Dollar (GBP/NZD) exchange rate held steady today, with the pairing currently trading around NZ$2.011 after this morning’s release of the UK Markit Services PMI for October failed to emerge from contraction territory, as ongoing Brexit fears weigh on the UK’s largest sector.

Duncan Brock, Group Director at the Chartered Institute of Procurement and Supply, was downbeat, saying:

‘The sector’s main difficulties are largely of Brexit’s making and with another deadline comes more indecision and delay. Businesses are putting off their investments for happier times and consumers are saving their pennies in case rising costs have a more severe impact on their daily lives.’

Today also saw the publication of the UK BRC Like-For-Like Retail Sales figure for October, which increased by 0.1% on the year due to shops discounting products to entice customers.

However, this had little effect on the GBP/NZD exchange rate with Sterling traders focusing on Britain’s political developments ahead of the 12 December general election instead.

Helen Dickinson, Chief Executive of the BRC, commented:

‘Retailers embarked on an extraordinary period of discounting this October as they tried to entice shoppers into making purchases. Fashion shops were particularly active, helping non-food return to growth for the first time since July.’

NZD/GBP Exchange Rate Steady, NZ Markets Brace for Global Dairy Trade Index

New Zealand Dollar (NZD) traders are remaining cautious ahead of today’s release of the New Zealand Global Dairy Trade Price Index figure. However, any signs of improvement could boost confidence in the ‘Kiwi’, with dairy being New Zealand’s largest exports.

Later on today will also see the release of the third quarter’s New Zealand jobs figures, but with the unemployment rate forecast to rise, we could see some of the New Zealand Dollar’s gains clipped.

Improving optimism over a US-China trade deal has failed to move the NZD/GBP exchange rate today, despite reports that the US could hold back tariffs on Chinese imports.

Alec Phillips, Goldman Sachs Chief US Political Economist was sceptical however, saying:

‘A US-China deal that substantially reduces US tariffs continues to look much less likely than an eventual breakdown in talks that leads to renewed tariff escalation.’

‘Achieving a broad US-China agreement dealing with issues like technology transfer looks quite difficult, and we believe it is unlikely that the White House would lower tariffs meaningfully unless such a comprehensive deal can be reached.’

GBP/NZD Outlook: BoE Interest Rate Decision in Focus

Sterling traders will be looking ahead to Thursday’s interest rate decision from the Bank of England (BoE), which is expected to hold at 0.75%. Any dovish commentary from BoE Governor Mark Carney could, however, see the GBP/NZD exchange rate begin to sink on heightened fears for the British economy.

Meanwhile, New Zealand Dollar (NZD) investors will be keeping a close eye on US-China trade developments this week, with any signs of a possible November trade deal emerging between the world’s two largest economies boosting risk-appetite and benefiting ‘Kiwi’.

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