Pound Advances against New Zealand Dollar (GBP/NZD) as UK Economic Recovery Sentiment Rises

Modified: Wednesday, 11 February 2015 16:17 BST - Written by James Fuller

STORY LINK Pound Advances against New Zealand Dollar (GBP/NZD) as UK Economic Recovery Sentiment Rises

The Pound advanced against the New Zealand Dollar on Wednesday as Sterling sentiment took an upswing. Economists improved confidence by suggesting that the UK’s economic recovery could continue with steady momentum. Bloomberg stated: ‘With manufacturing and construction expanding at a faster pace than economists forecast, and house prices jumping, Citigroup Inc.’s gauge of UK economic surprises climbed to the highest level since April. Protracted deliberations in the Euro area over Greece’s debt enhances the allure of Sterling as an alternative to the common currency.’

The current negotiations between Greece and the troika are dominating headlines and causing demand for the single currency to fluctuate rapidly. However, Greece recorded better capital outflows than expected in January at $177 million in comparison to December’s $166 million and November’s $149 million. Industry expert Michael Howell commented: ‘The January data show that Greece has been more stable than many feared. It’s not the disaster many worried about. It may well be the case that money is being taken out of domestic banks and put in foreign-owned banks within Greece, but there is little sign that the economy as a whole is haemorrhaging funds.’

Any developments in the Greek situation could have a knock-on-effect for the Pound and therefore investors will be eying political developments closely. Meanwhile, the New Zealand Dollar had a surge in sentiment as investors weighed the benefits of higher yields against risk. The ‘Kiwi’ rose to a near four-week high versus close counterpart the ‘Aussie’ as speculation for more interest rate cuts in the Oceanic region continued to circulate. Industry expert Con Williams stated: ‘Offshore traders continue to focus on the diverging trends in New Zealand Dollar and Australian Dollar fundamentals which will keep this cross elevated over the medium-term.’

Meanwhile, New Zealand Card Spending edged up by 0.1% in January—a positive development after December’s -0.3% contraction. However, the annual figure was dragged down from -0.1% to -0.4% after economists had expected 0.2% growth. The New Zealand Business Performance of Manufacturing Index will be out on Wednesday and could bolster the ‘Kiwi’ if favourable. The index resided at 57.7 in December, above the 50.0 benchmark which separates expansion from contraction. The UK House Price Balance figure will emerge on Thursday and could see the Pound gain if it prints in line with estimates. The ecostat registered 11% expansion in December and 12% growth is projected for January.

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