Pound Sterling Receives Timely Boost; GBP NZD Exchange Rate Close to 200 Day Moving Average

The pound enjoyed its biggest one day rise in a month against the euro yesterday after Prime Minister David Cameron promised “the good news will keep coming” during his weekly Prime Ministers Questions in Parliament. Although aides immediately refuted claims that the PM had broken the law by divulging sensitive economic data ahead of the official publication date, analysts believe that the Office for National Statistics (ONS) will release data this morning that will show that the UK has climbed out of its ‘double-dip’ recession after three consecutive quarters of negative growth.

The pound was also boosted by data from the euro zone that showed that economic activity in the euro zone dropped at its fastest rate since June 2009 in October. Markit's euro zone composite purchasing managers' index (PMI), fell to a 40 month low.

Markit also reported that firms in the euro zone continue to cut employment in response to lower levels of demand and remain close to the 32 month record low.

"The euro zone has slid further into decline at the start of the fourth quarter. The survey is running at a level which is historically consistent with the region’s economy contracting at a quarterly rate of over 0.5%. Official data have shown surprising resilience over the summer compared to the survey data, but the underlying business climate has clearly deteriorated markedly in recent months. While gross domestic product may decline only modestly in the third quarter, a steeper fall looks to be on the cards for the fourth quarter%," said Markit's Chief Economist Chris Williamson.

To complete the trio of bad news for the euro zone, the German IFO Business Climate Index, a measure of corporate confidence in Germany, declined unexpectedly in October to record its sixth consecutive monthly fall.

"The clouds over the German economy are darkening," said Hans-Werner Sinn, the President of the IFO Institute.

Overnight, the US Federal Reserve, as expected, made no changes to both its bond-purchase programme (Quantitative Easing) or its interest rate forecast with the US Presidential election only weeks away now. The Fed statement said it will keep its bond buying programme going and keep US interest rates at its record low level range of 0% to 0.25% until the job market improves.

The pound also rose to its highest level since 2 July against the Canadian dollar. This week, as expected, the Canadian central bank kept monetary policy unchanged but the ‘loonie’ as the Canadian dollar is known has been hit by the sharp fall in crude oil futures prices which fell for the fifth straight session to a new three-month low on Wednesday as weekly US supply data showed a well-stocked market. Crude stockpiles are now at the highest level since the EIA started keeping weekly data back in 1982. It also showed US demand has now fallen to a 9 low, underlining concern about a well supplied oil market against a weak global growth background.

Money Transfers to New Zealand:-

With the New Zealand Reserve Bank keeping New Zealand interest rates unchanged overnight, thus extending the period of record low borrowing costs as the Central Bank Governor, Graeme Wheeler stated that a stronger housing market is offsetting a fragile global economy. The central bank remain concerned about the slowdown in global growth may continue to hit demand for New Zealand exports.

This has limited the advance of the New Zealand dollar, thus keeping the pound to dollar exchange rate running along close to its 200 day moving average. With signs that China may have avoided a so called ‘hard landing’ for its economy, any pickup in demand from South East Asia would immediately benefit the New Zealand economy and strengthen the New Zealand dollar so clients looking to buy the ‘kiwi’ should consider a purchase in the short term.