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Daily Pound to New Zealand Dollar Update: Poor GDP Figures Trigger GBP Slump

September 29, 2017 - Written by David Woodsmith

Yesterday saw only a slight Pound to New Zealand Dollar rise. The pairing opened trading at a rate of 1.8575, then closed down in the evening near a rate of 1.8596.

GBP Recap: Traders Disappointed by Slowing UK Economic Growth

Today’s Pound to New Zealand Dollar decline has been brought about by a disappointing result for reported UK GDP in the second quarter.

The finalised figures have been worse-than-expected, showing an annual slowdown from 1.8% to 1.5%; these figures were compiled by the Office of National Statistics (ONS).

Looking at the figures was Darren Morgan, ONS Head of Gross Domestic Product. Morgan stated that;

‘There was a notable slowdown in growth in the first half of 2017. The often buoyant services sector was the only area to grow in the second quarter, mainly due to increases in computer programming and retail.

Household spending growth continued to slow in the second quarter. However, revised figures show business investment grew more strongly than previously estimated.

Meanwhile, the UK’s deficit with the rest of the world was little changed in the second quarter’.

In other news, concerns have been mounting about whether the UK will be able to suitably impress EU leaders before an October meeting.

During the month, heads of EU nations are due to meet and look at the UK’s current progress in Brexit negotiations.

If they feel that the UK has made sufficient progress, UK negotiators may be granted the coveted ability to move onto discussing a UK-EU trade deal after Brexit.

Unfortunately, the current outlook is not entirely positive. After a recent meeting with the UK Prime Minister, Irish PM Leo Varadkar gave a neutral evaluation;

‘I don’t think at this stage it would be possible to say that sufficient progress has been made but it may well be possible by the end of October, when we meet up in Brussels’.

In a similar line, the EU’s Chief Negotiator, Michel Barnier, has stated that ‘We aren’t there yet with sufficient progress’.

These statements go against UK Brexit Secretary David Davis’ assertion that there have been ‘decisive steps forward’ in Brexit talks.

Key issues that have been holding up negotiations include the status of EU citizens living in the UK, the future of the border with Northern Ireland and whether the UK will pay a hefty ‘exit bill’ to the EU.

New Zealand Dollar On the Rise after Building Permits Surge

Recent NZ construction figures have greatly benefitted the New Zealand Dollar, showing a significant increase in building permits.

In August, the printing has shown a rise from 1.7% in July to 10.2%, which bodes well when considering the impacts on the housing market.

More permits being granted implies that more houses will be constructed, which in turn means the housing shortage issue will be somewhat eased.

Any reduction of the NZ housing bubble can be considered ‘good’, even if building permits do not exclusively pertain to the construction of housing.

Other supportive news has come from the Reserve Bank of New Zealand (RBNZ). The central bank has stated that the national economy is in good health, even with the impacts of overseas events.

GBP NZD Outlook: Pound could Weaken on Services Sector Slowdown

So soon after this week’s report of slowing GDP, the Pound could again suffer from signs of economic stagnation next week.

The main news will be Wednesday’s services PMI for September, which is predicted to show a minor slowdown.

As the services sector is the UK’s largest economic contributor, any signs of reduced activity can be considered disappointing news.

In less predictable news, the Pound could also be influenced by notable Brexit-linked developments.

The October progress review isn’t expected until late in the month, but any signs of a breakthrough may still trigger a slight GBP advance before then.

Next week could see an NZD advance on Tuesday, if the Global Dairy Trade price index rises.

This previously showed a 0.9% rise in global dairy prices, which is a significant factor in the profitability of New Zealand’s dairy exporters.
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