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Pound New Zealand Dollar (GBP/NZD) Exchange Rate Steady as US-China Trade Uncertainty Weighs on ‘Kiwi’

November 1, 2019 - Written by John Cameron

GBP/NZD Exchange Rate Rangebound despite Improving Chinese Factory Figures

The Pound New Zealand Dollar (GBP/NZD) exchange rate held steady today, with the pairing currently trading around NZ$2.016. The ‘Kiwi’ failed to rise despite strong Chinese factory data today, with the Caixin Manufacturing PMI beating forecasts in October and rising to 51.7, providing some relief for the NZ economy which relies heavily on trade with China, its largest trading partner.

Michael Hewson, an Analyst at CMC Markets, commented:

‘The latest Chinese Caixin manufacturing survey hit its best levels since March 2017 in October, the third monthly expansion in succession, fuelling optimism that the Chinese economy may well have hit a short term bottom, and helping markets in Asia post a fairly decent session and start to the month.’

However, the NZD/GBP exchange rate has been held back by confusion surrounding the state of US-China trade negotiations, despite US President Donald Trump’s insistence of a “phase one” trade deal being signed this month.

Tensions between the two superpowers emerged on Thursday, with Chinese government officials becoming doubtable over a US-China compromise on US agricultural sales to China.

US Treasury Secretary Steven Mnuchin purchase commitments were based on ‘very specific discussions, adding:

‘This is built on a bottom-up basis of both what we think we can deliver and what they think they need. It’s a one-year target, but obviously it’s going to take some time to scale up.’

GBP/NZD Exchange Rate Flat, UK Manufacturing Remains Mired in Contraction Territory

The Pound (GBP) failed to gain on the New Zealand Dollar (NZD) today following the release of October’s UK Markit Manufacturing PMI, which remained mired in contraction territory at 49.6.

Rob Dobson, Director at IHS Markit, commented:

‘With a further Brexit extension confirmed and the prospect of a December general election, it looks as if the spectre of uncertainty will cast its shadow over manufacturing for the remainder of 2019.’

UK political developments have however remained in focus today, with the leader of the Brexit Party, Nigel Farage, threatening to contest every seat in the country unless Prime Minister Boris Johnson agrees to drop his current deal with the EU and commit to a “leave alliance”.

As a result, Sterling has struggled on continued political uncertainty, with Brexit effectively paused and the major party’s campaigns due to kick off in earnest next week.

GBP/NZD Outlook: Could Sterling Fall on Weak Construction Data?
Pound traders will be awaiting Monday’s release of October’s UK Markit Construction PMI, which is expected to remain in contraction territory at 44 and could potentially weaken the GBP/NZD exchange rate.

Meanwhile, New Zealand Dollar investors will be focusing on Tuesday’s publication of New Zealand’s employment figures. Any signs of improvement could potentially buoy market confidence in the ‘Kiwi’.

UK political developments will continue to occupy the spotlight next week, which could see the Pound begin to fall on heightened uncertainty surrounding Brexit.

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