- EUR NZD Exchange Rate Near 1.60 – Best levels since May as ‘Kiwi’ weakens
- Reserve Bank of New Zealand Jitters – Analysts speculate ‘jawboning’ ahead
- EUR Forecast: German Inflation Report Ahead – Could it affect ECB bets?
- NZD Forecast: Reserve Bank of New Zealand Meets Thursday – RBNZ could be dovish
Updated 16:53 BST 08/08/2017:
EUR NZD Slips Back from Two-Month-High
The Euro to New Zealand Dollar exchange rate briefly hit a fresh two-month-high of 1.6079 on Tuesday afternoon before slipping from its highs.
EUR NZD trended near the level of 1.6018 at the time of writing as demand for the Euro faded slightly.
Anticipation for Thursday’s Reserve Bank of New Zealand (RBNZ) policy decision could limit the New Zealand Dollar’s chances of recovery on Wednesday, however.
[Previously updated 12:40 BST 08/08/2017]
After yesterday’s surge, the EUR NZD exchange rate continued to trade above the key level of 1.60 during Tuesday morning trade.
While the pair has slipped slightly from a two-month-high of 1.6062, the pair still trends close to those highs.
The Euro has been supported by the latest inflation data from The Netherlands. July’s Netherlands inflation print improved from 1.1% to 1.3%.
Germany’s latest trade surplus report disappointed slightly, but demand for the Euro remains firm regardless.
[Previously updated 16:40 BST 07/08/2017]
After advancing in the morning, the EUR NZD exchange rate reached a new week high and the best level since May – 1.6034.
The pair continued to trend near this level as European markets came to a close on Monday evening.
Demand for the Euro continued to strengthen throughout the day and risky currencies like the ‘Kiwi’ remained weak due to a stronger US Dollar.
[Published 10:49 BST 07/08/2017]
The EUR NZD exchange rate was unable to hold its best levels last week as the latest US data caused a drop in demand for the Euro, helping the New Zealand Dollar to recover following a disappointing NZ job market report for Q2.
EUR NZD began last week trending at around 1.5638. After hitting a two-month-high of 1.6026 on Thursday the pair slipped and ended the week at 1.5881. So far this week the pair has advanced again and is testing levels of 1.60.
Euro (EUR) Outlook Strong on European Central Bank (ECB) Speculation
Recently optimistic Eurozone data has only helped the Euro to hold its recent highs.
Increasing hopes that the European Central Bank (ECB) could finally announce monetary policy tightening before the end of the year has left the shared currency increasingly strong in recent weeks.
While it’s possible the ECB will announce that the quantitative easing (QE) scheme will need to be left on hold for an extended period of time, markets are more confident that QE will be withdrawn instead.
ECB President Mario Draghi recently stated that the bank would likely discuss QE in the autumn. Some analysts predict an end-date for QE could be announced as soon as September.
Besides a brief surge in US Dollar demand at the end of last week, the Euro has also continued to benefit from broad US Dollar (USD) weakness amid US political and economic concerns.
There has been rising concern among Euro exporters that the strength of the shared currency will affect business. However, many analysts believe the Euro has yet to become a notable risk to Eurozone growth.
Still, economic data from the bloc isn’t all good either. Monday’s Eurozone data was slightly disappointing and weighed on the shared currency’s strength at the beginning of the week.
Germany’s June industrial production report was forecast to slip from 1.2% to 0.2% but instead came in at -1.1%.
Sentix’s latest Eurozone investor confidence figure also weakened in August, from 28.3 to 27.7, slightly below the expected 27.8.
New Zealand Dollar (NZD) Weakens as Investors Predict RBNZ Dovishness
Due to poor New Zealand employment stats last week and the recent strength of the New Zealand Dollar itself, ‘Kiwi’ investors are becoming anxious that the Reserve Bank of New Zealand (RBNZ) could take a dovish stance in this week’s meeting.
New Zealand’s Q2 job market report saw the nation’s participation rate shock with a drop from 70.6% to 70.0% and the unemployment change print unexpectedly contracted at -0.2%.
Despite this, the New Zealand Dollar has seen strong trade against some major currencies like the US Dollar, potentially making the currency’s value an obstacle for the RBNZ.
As a result, NZD traders are becoming anxious that the RBNZ will attempt to ‘jawbone’ the New Zealand Dollar, by warning on the currency’s value in the hopes it will prompt traders to sell it.
The latest New Zealand data has not been particularly impressive either. New Zealand’s Q3 business inflation expectations survey slipped from 2.2% to 2.1%, indicating that businesses expect inflation to slow in the next quarter.
EUR NZD Exchange Rate Forecast: RBNZ Meeting in Focus
The Reserve Bank of New Zealand (RBNZ) will be holding its August monetary policy decision during Thursday’s Asian session and is likely to be the biggest influence for EUR NZD movement this week.
Analysts predict the RBNZ will leave monetary policy frozen at the loosest levels on record. Investors are hoping the bank will show some hawkish signals, but the past week’s data has made that seem less likely.
If the RBNZ takes a more dovish stance as investors expect or attempts to talk the New Zealand Dollar down from its recent highs, the ‘Kiwi’ is likely to weaken.
Some analysts, such as Joseph Capurso from CBA, believe the bank will not notably change its tone;
‘Together with the low New Zealand Q2 CPI, the recent lift in the NZD raises the question of whether the RBNZ will talk down the NZD or replace its monetary policy’s neutral bias with an easing bias. We think the RBNZ will do neither, though it is a risk.’
The coming week’s German data could influence Euro movement. Germany’s June trade surplus will be published on Tuesday and the July inflation report will come in on Friday.
However, as the Euro’s upside potential is limited without further forward guidance from the ECB, the Euro to New Zealand Dollar exchange rate is more likely to be influenced by the RBNZ meeting this week.
EUR NZD Interbank Rate
At the time of writing this article, the EUR NZD exchange rate trended in the region of 1.6025. The New Zealand Dollar to Euro exchange rate traded at around 0.6235.