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Pound Sterling New Zealand Dollar (GBP/NZD) Exchange Rate Falls as UK Economy ‘Close to Stagnation’

June 5, 2019 - Written by John Cameron

Pound New Zealand Dollar (GBP/NZD) Exchange Rate Slumps as UK Services Hit by Brexit Headwinds

The Pound Sterling New Zealand Dollar (GBP/NZD) exchange rate slumped and the pairing is currently trading at an inter-bank rate of NZ$1.9148.

On Wednesday, it was revealed the UK services PMI rose to a higher-than-forecast 51 in May from 50.4 in April.

New work rose for the first time since December 2018 and business activity increased modestly.

However, it was revealed that there were widespread reports of Brexit uncertainty remaining a headwind to growth, weighing on Sterling.

Added to this, the PMI composite edged down to 50.7 from 50.9, suggesting the economy has lost momentum since the start of the year.

Commenting on the data, Chris Williamson, Chief Business Economist at IHS Markit said:

‘Although service sector business activity gained a little momentum in May, with growth reaching a three-month high, the pace of expansion remained disappointingly muted and failed to offset a marked deterioration in manufacturing performance and a fall in output of the construction industry during the month. As a result, the PMI surveys collectively indicated that the UK economy remained close to stagnation midway through the second quarter as a result, registering one of the weakest performances since 2012.’

New Zealand Dollar (NZD) Rises despite Falling GDT Price Index

Global dairy prices slumped for the second time in a row at Wednesday’s dairy auction.

The Global Dairy Trade (GDT) Price Index slipped by -3.4%, and fell by -1.2% in the previous auction.

The average selling price was $3,423 a tonne, and the price of whole milk powder slipped by -1.5%.

Commenting on this, NZX Dairy Analyst, Robert Gibson said:

‘This is the fifth consecutive decrease in the whole milk powder price index, with price levels decreasing more significantly for spring deliveries.’

Meanwhile, the value of skim milk powder fell by around -4%.

However, the ‘Kiwi’ was largely unchanged by the disappointing data and rose against Sterling.

Pound New Zealand Dollar Outlook: Will US-China Trade Tensions Weigh on NZD?

Looking ahead to Thursday, the New Zealand Dollar (NZD) may rise against Sterling (GBP) following the release of the ANZ commodity price.

If May’s commodity price increases higher than forecast it could buoy the ‘Kiwi’.

Meanwhile, due to a lack of notable economic data releases it is likely the ongoing US-China trade tensions will weigh on the risk-sensitive NZD.

If reports suggest tensions have heightened, the Pound New Zealand Dollar (GBP/NZD) exchange rate could rise.

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