The New Zealand Dollar rose against the Sterling and several European currencies on Thursday on indications of an improvement in the country’s business confidence.

Indeed, business confidence in New Zealand stood at -3.7 in August, according to the results of an ANZ survey, a significant improvement from the reading of -13.1 in July.

That said, the improved reading still fell short of market expectations of a reading of -1.9.

“Business confidence is still low, but sentiment is on the rise,” according to Westpac’s Shania Bonenkamp.

Following the business confidence data, the Pound to New Zealand Dollar rate eased to 2.1330, yet wasn’t sufficient to reverse the 1-0 gain during the midweek session, Pound Sterling Live reports.

“All up, in contrast to some indicators – notably the BNZ-Business NZ PMI – the ANZ survey points towards the economy maintaining its head above water this year ahead, rather than recessing,” Bonenkamp added.

In Q1, New Zealand officially tipped into recession as the economy contracted 0.1% over the three months after shrinking 0.7% in Q4 last year.

This led the Reserve Bank of New Zealand (RBNZ) to bring an end to its rate-hiking cycle well before other central banks.

Over the year, the Pound to New Zealand Dollar rate has rallied, but towards the end of August, it went against the trend and retreated.

However, the trend is still in favour of the Sterling, and a 1.0% rebound for the rate on Wednesday indicated the recent retracement could be nearing an end, and Sterling bulls will again be focused on a retest of the year highs at 2.1585, the Pound Sterling Live report adds.

A degree of the 1.0% gain may be due to the central bank’s activity in the forex markets, selling New Zealand Dollars to build forex reserves.

“The RBNZ announced yesterday that it had sold a net NZ$4 billion during July to build foreign reserves, noting also that it wasn’t an intervention. An updated FX reserves framework was published in January, which outlined that an increase in reserves was required,” stated BNZ analyst Stuart Ritson.

Yet the uptrend in GBPNZD is bolstered by key narratives, one being the likelihood of additional rate hikes by the Bank of England.