UK Businesses Expand at Fastest Pace in 11 Months, Driving GBP/NZD Towards 2.0990

UK businesses expanded at the fastest pace in 11 months in April, driving the GBP/NZD exchange rate towards 2.0990 with bullish technical indicators and a potential target of 2.1080. The S&P Global UK Composite Purchasing Managers' Index, which covers both the services and manufacturing sectors, jumped to an 11-month high of 54.0 in April from 52.8 in March.

The improved business growth was accompanied by continued elevated levels of optimism about the 12-month outlook, with an accelerated rate of increase in new orders. The survey data also showed that hiring picked up, with gains limited to the service sector, while manufacturing headcounts continued to fall.

The headline economic growth indicator, the S&P Global UK Composite Output Index, rose to 54.0 in April from 52.8 in March, signaling a sixth successive monthly expansion of output. This indicates that GDP is rising at a quarterly rate of almost 0.4% at the start of the second quarter, building on the robust 0.25% gain in the first quarter.

Why this matters: The strong expansion of UK businesses in April suggests that the economy is continuing to recover from the technical recession seen late last year, with solid growth being registered. This positive economic momentum could have implications for monetary policy decisions and investor sentiment towards the British Pound.

The GBP/NZD pair rallied towards the 38.2% Fibonacci resistance level, and a sustained break above this level could open the door to the 2.1100 level. The technical indicators are bullish, with the daily RSI at 64 and the 9 and 10 DMAs trending upwards. The immediate resistance is at 2.0998 (38.2% Fib), and a close above this level could push the pair towards 2.1087 (April 18th high). Strong support is seen at 2.0852 (50% Fib), and a break below could take the pair towards 2.0793 (March 15th low).

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, commented: "April's survey data provide encouraging evidence that the UK economy is enjoying a strong start to the second quarter, with output growth regaining momentum after having been subdued in recent months. The service sector led the upturn as demand continued to rebound from the pandemic, while manufacturing output came close to stalling due to ongoing supply shortages, rising costs and signs of a weakening in the goods export market."

Key Takeaways

• UK businesses expanded at fastest pace in 11 months in April.
• S&P Global UK Composite PMI jumped to 54.0, signaling economic recovery.
• Hiring picked up in service sector, while manufacturing headcounts fell.
• GBP/NZD pair rallied towards 38.2% Fibonacci resistance level.
• Positive economic momentum could impact monetary policy and investor sentiment.