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GBP NZD Exchange Rate Rallies as Industrial Orders Surge

May 19, 2017 - Written by Frank Davies

The Pound New Zealand Dollar (GBP NZD) exchange rate leapt to a new weekly high this morning as UK factory orders printed higher than expected last month

According to data released by the Confederation of British Industry (CBI) Britain’s industrial orders balance rose from 4 to 9 in April, beating expectations that they would remain unchanged and reaching a new two-year high.

The survey of 432 manufacturers in the UK showed an unexpected uptick in domestic demand which combined with robust exports lead to strong order growth.

Firms also appeared upbeat about the potential for future growth as they forecast a further jump in production over the next quarter, although many also remain wary of additional pressures from rising input cost due to the consequences of the fall in the pound over the last year.

Investors are hopeful that the rise in production is a signal that UK growth will rebound in the second quarter after a disappointing start to the year.

Chief European & U.K. Economist at IHS Markit Howard Archer said;

‘The data fuels hopes that the UK economy is on course for some pick-up in growth in the second quarter after GDP expansion more than halved to 0.3% quarter-on-quarter in the first quarter. Hopes of improved second quarter growth got a significant boost from retail sales picking up markedly in April, although they were helped by warmer weather.’

However many analysts remain concerned over the impact that Brexit may have on the UK’s industrial sector as Prime Minister Theresa May looks set to lead the country into a hard Brexit, should she win in next month’s general election as expected.

Meanwhile the New Zealand Dollar has been weakened by a fall in market risk appetite as Trump signalled that he plans to begin the renegotiation of the Nafta trade agreement with Canada and Mexico ‘as soon as practicable’.

Investor fear that this could signal the start of Trump’s isolationist plans for the US to ‘make American and buy American’, which could have a major impact on global trade, a particular worry for NZD investors.

Looking ahead the GBP NZD exchange rate may relinquish some of its gains next week if the UK’s Public Sector Borrowing figures show that the government deficit grew from -£4.36bn in April.

The Pound may also be pressured by the UK’s second GDP estimate on Thursday as economists predict it will confirm that first quarter growth dropped from 0.7% to 0.3%.

Meanwhile the New Zealand Dollar may advance on Tuesday if the domestic trade balance rose from NZ$332m last month as forecast.

Current Interbank Exchange Rates

At the time of writing the GBP NZD exchange rate was trending around 1.8883 and the NZD GBP exchange rate was trending around 0.5294.
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