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‘Little Room’ for UK Construction to Improve Pushes Pound New Zealand Dollar (GBP/NZD) Exchange Rate Lower

September 3, 2019 - Written by John Cameron

Pound New Zealand Dollar (GBP/NZD) Exchange Rate Slides as Business Optimism Slumps to Decade Low

The Pound Sterling New Zealand Dollar (GBP/NZD) exchange rate slumped and the pairing is currently trading at an inter-bank rate of NZ$1.9058.

Sterling remained under pressure as data revealed the UK’s construction PMI slipped further into contraction from July’s 45.3 to 45 in August.

Business optimism sunk to its lowest level since December 2008 and new orders fell at the fastest pace in over a decade.

However, the survey also revealed that trends in employment were resilient with the slowest rate of decline in staffing levels since the downturn in April.

Commenting on the data, Duncan Brock, Group Director at the Chartered Institute of Procurement and Supply noted:

‘As Brexit creeps closer and confusion still reigns, this will undoubtedly heap more pressure on the UK Government to create much-needed clarity in the market. The commercial sector particularly has been devastated by reluctant clients fearful of taking a wrong turn in a confusing landscape and delaying project starts, resulting in the fastest drop in new orders since March 2009.

‘The reality is, if a revival of confidence and a flood of new orders return to the construction sector in the coming weeks, much like a large tanker turning in a dock, there is little room for the sector to improve in the last quarter of the year. It is likely September’s data will be even more discouraging.’

New Zealand Dollar (NZD) Rises as US-China Trade Talks Come to a Standstill

Meanwhile, the New Zealand Dollar rose despite US-China trade discussions coming to a standstill as each side hit imports with new tariffs on Sunday.

On Tuesday, an advisor of the Beijing government stated it is up to the US to break the current standstill.

Wang Huiyao, president of Center for China and Globalization has stated Beijing has already taken ‘all efforts’ to address concerns.

He noted that China has always maintained it is willing to continue discussions, and added:

‘It’s up to the US to really go ahead and be flexible and not take a really harsh attitude on this.

‘We cannot have a perfect deal. You can see that China has continued to open not for the US’s sake and interest, but for China itself.

‘I think that for the US, they have to see the progress China is making and then probably work on that momentum to push China to be more open, rather than put China into a hard position.’

Brexit Turmoil Pushes Sterling (GBP) Lower

Political turmoil continued to push Sterling lower on Tuesday morning as parliament prepared to reconvene.

Tory MP, Justine Greening revealed she would not be running in the next election, calling Brexit the ‘political version of Ebola’.

Meanwhile, Prime Minister Boris Johnson is set to face a showdown after warning he would call for a snap election next month.

Johnson said that if MPs voted against the government it would be ‘impossible’ to make any progress with the European Union and ‘plainly chop the legs out from under the UK position’.

Meanwhile, reports have also suggested Brexit tensions could see Sterling could end the day at its weakest closing level in 34 years against the US Dollar, likely causing the pairing to slump further.

Pound New Zealand Dollar Outlook: Will Stagnating UK Services Push GBP Lower?

Looking ahead to this afternoon, the New Zealand Dollar (NZD) could rise against Sterling (GBP) following the release of the Global Dairy Trade (GDT) Price Index.

If dairy prices rebound this week, the ‘Kiwi’ is likely to receive an upswing of support.

Meanwhile, Sterling is likely to remain under pressure due to Brexit pessimism and ahead of the UK services PMI.

If August’s PMI edges closer than forecast to stagnation, the Pound New Zealand Dollar (GBP/NZD) exchange rate will slump.

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