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GBP to NZD Exchange Rate Tumbles as UK Services PMI Falls Short of Forecasts

April 5, 2018 - Written by Toni Johnson

A combination of disappointing UK ecostats and higher market demand for risky trade-correlated currencies caused the British Pound to New Zealand Dollar (GBP/NZD) exchange rate to fall on Thursday. The pair is currently on track to end the week below its opening levels.

Despite briefly touching a high of 1.9516 on Tuesday, GBP/NZD looks on track to see more losses this week. The pair opened the week at the level of 1.9344 and has been falling again since Tuesday morning. On Thursday the pair touched a low of 1.9192, its lowest level in half a month.

GBP Sold as Disappointing UK Services Stats Show Economic Uncertainties


Thursday saw the publication of this week’s most influential UK ecostats, but the results fell short of expectations and as a result investors have had little reason to keep buying the Pound.

Markit’s UK services PMI for March slowed even further than forecasts predicted, due largely to unusually bad weather including snow and ice throughout the nation in March.

The PMI was forecast to have slipped from 54.5 to 53.9, but instead slumped to just 51.7. This was the slowest growth figure for Britain’s biggest economic sector since the 2016 Brexit vote.

Analysts were unsure if the drop in services would only be a blip caused by poor weather, or if the slowdown could become something more prolonged.

According to Sam Hill from the Royal Bank of Canada (RBC);

‘The UK IHS Markit / CIPS Composite PMI dropped to 52.5 in March, a full two points lower than the previous month, on account of a large drop in the service sector survey.
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Whilst the manufacturing sector survey didn’t contain too much evidence of weather-related disruption to activity, widespread snow early in March did appear to account for a good deal of the weakness in the construction and service sectors. The result is that our PMI-based GDP indicator now suggests Q1 GDP growth will be just 0.2% QoQ, rather than 0.3% QoQ previously. Given the margin for error in the indicator, and the relatively brief period of weather-related disruption we maintain our forecast of 0.3% QoQ for Q1 GDP for the time being.’


The data followed disappointing construction PMI data on Wednesday, but surprisingly strong manufacturing data on Tuesday.

Due to the disappointing construction and services stats, Britain’s overall UK composite PMI for March slowed to a lower than expected 55.2.

NZD Benefits from Recovery in Risk-Sentiment on US Trade Hopes


Despite a lack of notable New Zealand ecostats in recent sessions, the New Zealand Dollar has been able to climb against many majors, including the Pound.

This is largely due to the New Zealand Dollar being preferable to other risky trade-correlated currencies amid the high uncertainty over US trade stances.

The US has recently announced trade tariffs aimed at China and China has retaliated by announcing tariffs on US goods.

As this has weakened many currencies from nations with strong trade ties to the US and China, such as the Australian Dollar (AUD), the New Zealand Dollar has benefitted.

Recent signs that the US and China may be looking to resolve trade issues through negotiations instead has also made investors less hesitant to buy risky currencies.

GBP/NZD Forecast: Trade Developments Could Continue to Push Pair Lower


As UK data has disappointed this week, some analysts and investors have become uncertain that the Bank of England (BoE) will still hike UK interest rates in May.

As a result, markets will pay close attention to a speech from BoE Governor Mark Carney on Friday. If Carney makes any comments on UK monetary policy, Sterling is likely to be influenced.

However, if there are no surprising developments, the Pound to New Zealand Dollar exchange rate could end the week lower.

The New Zealand Dollar is even more likely to continue advancing if markets become increasingly confident that the US and China will seek out negotiations to resolve trade issues, rather than ramp up trade tariff plans.

As for data, next week’s economic calendar will be a little quieter. UK trade and production stats will be published, as well as New Zealand business confidence stats.

With data potentially less likely to be influential next week, GBP/NZD could be influenced more by developments in Brexit or US trade news.
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