August 5, 2020 - Written by John Cameron
STORY LINK Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Edges Higher as UK Services PMI Sees ‘Strong Return to Form’
GBP/NZD Exchange Rate Rises as Hopes for the UK Economy Grow
The Pound to New Zealand Dollar (GBP/NZD) exchange rate rose by 0.2% today, with the pairing currently trading around NZ$1.97.
Sterling edged higher against the New Zealand Dollar (NZD) today following the release of the UK services PMI, which fell slightly below consensus from 56.6 to 56.5.
However, with the UK’s largest sector performing relatively strongly, GBP investors have become more optimistic about the economy.
Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, commented on the data:
‘The services sector showed a strong return to form at the beginning of the third quarter, with the sharpest rise in overall activity since July 2015 and with new orders making a comeback at the fastest pace since the beginning of the year.’
Meanwhile, concerns continue to grow over the UK’s unemployment crisis. This follows reports that retail giants WH Smith and M&Co will cut nearly 2,000 jobs as they struggle with the effects of the coronavirus crisis.
Carl Cowling, the chief executive at WH Smith, commented:
‘Covid-19 continues to have a significant impact on the WH Smith Group.’
‘In our travel business, while we are beginning to see early signs of recovery in some of our markets, the speed of recovery continues to be slow. At the same time, while there has been some progress in our high street business, it does continue to be adversely affected by low levels of footfall.’
New Zealand Dollar (NZD) Falls as NZ Unemployment Figures Spark Concern for Economy
The New Zealand Dollar (NZD) has continued to struggle today following a surprise surge in New Zealand’s unemployment rate at 4%. As a result, NZD investors have become increasingly concerned for New Zealand’s economic recovery in the months ahead.
Nick Tuffley, ASB’s chief economist, was mixed in his response, saying:
‘[The data is] certainly welcome to the extent they indicate a stronger-than-expected starting point for the labour market. However … we know labour market conditions are likely to deteriorate from here.’
In New Zealand economic news, today saw the release of the ANZ Commodity Price figure for July, which beat forecasts and rose from -0.8% to 2.3%.
Meanwhile, growing concerns over US-China trade relations are holding back investor’s confidence in the risk-averse ‘Kiwi’. If tensions between the world’s two largest economies continue to escalate, then we could see the New Zealand Dollar sink deeper.
GBP/NZD Outlook: Bank of England’s Interest Rate Decision in Focus
Pound (GBP) traders will be looking ahead to tomorrow’s publication of the Bank of England’s (BoE) interest rate decision. However, Sterling could suffer if the Bank is notably dovish in its monetary policy following the rate decision, which is expected to hold at 0.1%.
Tomorrow will also see the release of the final UK construction PMI for July. If this confirms consensus and rises to 57, then we could see Sterling continue to rise.
The New Zealand Dollar (NZD), meanwhile, will be affected by tomorrow’s release of the latest RBNZ inflation expectations for the third quarter. Any improvement in the outlook for the NZ economy would buoy the ‘Kiwi’
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