Decline in Construction PMI Slows GBP/NZD Advance
The Pound New Zealand Dollar (GBP/NZD) exchange rate gains have been trimmed this morning as markets reacted to the UK’s latest Construction PMI.
At the time of writing the GBP/NZD exchange rate is up by around 0.2%, having slipped back from gains of around 0.3% earlier in the session.
Sterling (GBP) Gains
The Pound has been forced to cede some of its early gains against the New Zealand Dollar this morning as construction activity in the UK was shown to have slowed significantly in January.
According to data compiled by IHS Markit, the UK’s construction PMI tumbled from 52.2 to 50.2 in January, disappointing markets who have expected a modest uptick to 52.8.
This leaves the sector dangerously close to contraction as it nears the 50-point marker which denotes growth.
Sam Teague, Economist at IHS Markit, said;
‘January’s PMI data indicated a difficult start to 2018 for the UK’s construction sector, underlined by business activity growth slumping to a four-month low and new orders sliding back into decline.’
The poor result appeared to be largely driven by a slowdown in residential construction, which has previously been a major source of resilience for the sector.
However analysts also point out that the collapse of Carillion, will have also hit the sector last month, with work stopping at a number of projects and a number of firms forced to lay off staff, which will have likely dragged on the sector.
New Zealand Dollar (NZD) Weakened as Markets Await US Payroll figures
In the meantime the New Zealand Dollar is on the defensive this morning as markets await the release of the latest US Non-Farm Payrolls later this afternoon.
The payroll figures are forecast to show that the number of people entering the US work force sped up last month, likely strengthening the US Dollar (USD).
The possible rally in USD is likely reduce risk appetite, dragging on the ‘Kiwi’ and driving it lower against the Pound.
GBP/NZD Forecast: Slowdown in UK Service Sector to Pressure Sterling?
Looking ahead to next week the GBP/NZD exchange rate may be forced to cede ground again on Monday as the UK publishes its latest Services PMI.
Economists forecast that the index will slide from 54.2 to 54.0 in January, likely weakening the appeal of the Pound.
Meanwhile the New Zealand Dollar could start next week on solid footing if dairy prices rise again at the latest Global Dairy Auction.
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