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Pound New Zealand Dollar (GBP/NZD) Exchange Rate Rises as NZ Business Confidence Falls to Lowest Since 2009

July 31, 2019 - Written by John Cameron

GBP/NZD Exchange Rate Improves NZ Economic Outlook Deteriorates

The Pound New Zealand Dollar (GBP/NZD) exchange rate edged higher today, leaving the pairing trading around NZ$1.841.

The New Zealand Dollar (NZD) fell against the Pound (GBP) following this morning’s publication of the ANZ Activity Outlook figures for July, which fell below consensus from 8.0% to 5.0%.

Today also saw the publication of the ANZ Business Confidence index for July, which fell from -31.1 to -44.3 – its lowest level since 2009.

Miles Workman, a Senior Economist at ANZ, commented:

‘The main theme this month was a sharp deterioration in sentiment in the construction sector across a wide range of indicators. Residential construction intentions fell back into negative territory. Employment intentions and profitability expectations for the construction sector plummeted to the lowest since 2009.’

The ‘Kiwi’ has suffered today from a general deterioration in its economic outlook, which has left many NZD traders feeling jittery as global headwinds and tensions fail to provide any relief for the risk-sensitive currency.

US-China trade meetings also ended in a state of uncertainty, with Hua Chunying, a spokeswoman for the Chinese Foreign Ministry, saying:

‘I believe it doesn’t make any sense for the U.S. to exercise its campaign of maximum pressure at this time. It’s pointless to tell others to take medication when you’re the one who is sick.’

GBP/NZD Exchange Rate Improves despite Rising Brexit Concerns

The Pound (GBP) meanwhile benefited from this morning’s release of the GfK Consumer Confidence Index reading for July, which beat forecasts and rose from -13 to -11.

Joe Staton, a Client Strategy Director at GfK commented:

‘Pre-Brexit, consumers are marginally more bullish this month – with improvements in levels of confidence across most measures.’

However, today’s gains are expected to be short-lived for the Pound, as Prime Minister Boris Johnson has taken on a notably more confrontational stance with the EU over the Irish backstop.

Mr Johnson said:

‘They know that three times the House of Commons has thrown out that backstop, there’s no way that we can get it through… [I]f they really can’t do it, then clearly we have to get ready for a no-deal exit.’

Sterling traders are now becoming more jittery as the likelihood of a no-deal Brexit on October 31 has now increased.

GBP/NZD Outlook: Sterling is Likely to Sink on Heightened Brexit Uncertainties

Pound traders will be looking ahead to tomorrow’s Bank of England interest rate decision, which is expected to hold at 0.75%.

However, any dovish commentary during the Governor of the BoE Mark Carney’s speech following the decision could further weigh on Sterling, as Brexit – and particularly the heightened likelihood of a no-deal – may crop up during the statement.

Tomorrow will also see the publication of the UK Markit Manufacturing PMI figures for July, which are expected to ease from 48 to 47.7.

New Zealand Dollar investors, meanwhile, will be keeping a close eye on the Chinese Caixin Manufacturing PMI figures for July, and with any improvement in New Zealand’s closest trading partner’s economy, ‘Kiwi’ benefit.

The GBP/NZD exchange rate will however remain volatile on Brexit developments this week, and if Boris Johnson maintains his aggressive stance with the EU, we could see Pound begin to fall once again.

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