The pound lost ground against the Kiwi dollar yesterday following reports of worse-than-anticipated construction output data for April. The better-than-anticipated New Zealand’s current account balance data also enabled the New Zealand dollar to gain ground against the pound. Overall, the GBP/NZD pair declined from a high of 2.0530 to a low of 2.0489 in the past 24 hours.
According to Statistics New Zealand, the country’s current account deficit narrowed to N$5.22 billion in the March 2023 quarter from N$10.07 billion in the December 2022 quarter. The reported figure was lower than forecasts of a current account deficit of N$6.95 billion.
On a seasonally adjusted basis, New Zealand’s current account deficit was N$8.30 billion in 1Q 2023. This compares with a N$9.23 billion deficit in the previous quarter.
For the year ended March 31, 2023, the current account deficit widened to N$33 billion from $24.20 billion in the year ended March 31, 2022.
Goods exports fell by N$1.10 billion to N$ 17.30 billion in the March 2023 quarter. Likewise, goods imports declined by N$1.30 billion to N$21.20 billion in the same period. Overall, the seasonally adjusted goods deficit narrowed by N$152 million to N$3.90 billion.
Services exports fell by N$54 million to N$5.90 billion in the March 2023 quarter. Also, service imports decreased by N$146 million to N$7.70 billion. As a result, the services deficit narrowed by N$92 million to N$1.80 billion in Q1 2023.
According to the UK Office for National Statistics (ONS), the country’s economy expanded 0.20% m-o-m in April, following a 0.30% GDP contraction in the previous month and in line with economists’ estimates.
The increase in the UK’s GDP was primarily due to 0.30% growth in the services sector in April. In March, the UK’s GDP fell by 0.50%. Specifically, output in consumer-facing services rose by 1% in April, following a decrease of 0.80% in March.
Overall, the UK’s GDP inched up 0.10% in the three months ended April 2023.
In a separate news release, the ONS stated the UK’s construction output (in volume terms) declined by 0.60% m-o-m in April following an increase of 0.20% in the previous month. Economists did not anticipate any change from the previous month’s reading. The reported reading reflects the first decline after two successive months of growth.
The decline was primarily led by a 1% decline in fresh work. Five out of the nine sub-sectors recorded a decrease in April 2023. Overall, the UK’s construction output posted a 1.60% rise in the three months ended April 2023.
The ONS also stated that industrial production contracted 0.30% m-o-m in April, following a 0.70% growth in the previous month and worse than forecasts of a 0.10% decline. Three out of four production sectors recorded contractions.
The monthly decline in output in April 2023 was caused by a decline in three of the four production sectors, with manufacturing being the main culprit (0.3%), followed by mining and quarrying (1.9%), water supply and sewage (0.1%), and mining and quarrying (0.1%). This was partially offset by an increase in electricity and gas, which increased by (0.6%).
The weak economic data from the UK is expected to keep the GBP/NZD pair slightly bearish in the short term.
The historical price chart indicates that the GBP/NZD pair is declining after facing resistance at 2.0530. The next support is anticipated only near 2.0390. Additionally, the currency pair is trading below its 50-day moving average, while the stochastic indicator is declining toward the bearish zone. Therefore, we anticipate the GBP/NZD pair to remain in a downtrend in the short term.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
