Investors continued to shy away from Pound Sterling (GBP) today as the UK steel industry remains in crisis, while the New Zealand Dollar (NZD) has strengthened on the back of the latest Chinese manufacturing data.
Pound Sterling (GBP) Softens Today in spite of Higher Nationwide House Prices
Although the UK’s fourth quarter GDP was revised upwards yesterday from 1.9% to 2.1% this failed to particularly revive the appeal of Pound Sterling (GBP). Investors remain primarily concerned with developments regarding the future of the UK steel industry, after Indian conglomerate Tata Steel announced its desire to offload its UK assets. This has led to a sharp scramble for the government to find an alternative means of keeping the various mills operating, with roughly 40,000 jobs at stake should the industry be left to collapse.
However, the handling of the situation has been widely criticised, particularly as the government has seemed to rule out the possibility of even temporary nationalisation. With the outlook of UK steel looking increasingly uncertain the Pound has continued to trend lower against rivals, in spite of a better-than-expected Nationwide House Price figure on Friday.
Unexpected Return to Growth for Chinese Manufacturing Shores up New Zealand Dollar (NZD) Exchange Rate
The New Zealand Dollar (NZD), on the other hand, has been benefitting strongly from overseas data this week. Demand for higher-yielding commodity currencies leapt in the aftermath of a dovish speech from Fed Chair Janet Yellen, with markets reassured by the lowered odds of an imminent interest rate hike from the central bank. This saw the prices of US Dollar (USD) denominated commodities pushed higher, while also lessening pressure on the Reserve Bank of New Zealand (RBNZ) to cut interest rates again in the near future.
Market confidence improved further today thanks to the latest Chinese Manufacturing PMI, which showed an unanticipated return to expansion territory in March. Clocking in at 50.2 rather than the forecast 49.3, this shored up some measure of optimism in the outlook of the world’s second largest economy.
GBP/NZD Exchange Rate Forecast: Weaker US Payrolls to Bolster New Zealand Dollar Today
This afternoon the ‘Kiwi’ could extend its recent gains on the back of the US Non-Farm Payrolls report. As wage and jobs growth are significant indicators on which the Federal Open Market Committee (FOMC) bases its monetary policy a disappointing result could put an end to speculation of an imminent interest rate hike. Any signs of slowing growth are thus likely to see the New Zealand Dollar trend higher going into the weekend, pushing the GBP/NZD exchange rate further into a slump.
Current GBP, NZD Exchange Rates
At the time of writing, the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate was trending lower at 2.0694, while the New Zealand Dollar to Pound Sterling (NZD/GBP) pairing was making gains in the region of 0.4830.
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