Swath of ECB Easing Measures Failed to Weigh Strongly on Euro (EUR) Exchange Rate
Although the European Central Bank (ECB) surprised markets with a far-wider raft of monetary loosening than pundits had expected the Euro (EUR) saw a rapid resurgence in value due to a comment from ECB President Mario Draghi. Overnight the Euro to New Zealand Dollar (EUR/NZD) exchange rate returned to a slump, trending lower in the region of 1.6628 on Friday morning.
Central bank policy is driving sentiment on Thursday morning, as the ‘Kiwi’ (NZD) recovers from a surprise Reserve Bank of New Zealand (RBNZ) rate cut and the Euro (EUR) braces for potential European Central Bank (ECB) easing.
Surprise RBNZ Rate Cut Pushed Euro to New Zealand Dollar (EUR/NZD) Exchange Rate to Ten-Day High
Markets had been fairly confident that the Reserve Bank of New Zealand (RBNZ) would go down the route of jawboning yesterday evening, with expectations that interest rates would be left on hold and dovish rhetoric would emphasise the central bank’s willingness to cut in future. As a result the New Zealand Dollar (NZD) saw a sharp decline when the RBNZ instead announced that it was slashing rates from 2.50% to 2.25%, in a move that caught investors off guard.
Governor Graeme Wheeler also left the door open for further monetary loosening in coming months in comments to reporters, a prospect that saw the Euro to New Zealand Dollar (EUR/NZD) exchange rate jump to a ten-day high of 1.6573.
Euro (EUR) Exchange Rate on Bearish Form ahead of ECB Policy Decision Today
Fresh volatility is likely for the EUR/NZD currency pair today as the European Central Bank (ECB) will be announcing the results of its own policy meeting. Expectations are rather higher for ECB President Mario Draghi, with economists considering an interest rate cut all but inevitable at this juncture. However, after Draghi failed to deliver on hopes of a substantial expansion of the bank’s monetary loosening measures in December there remains some uncertainty amongst traders ahead of the announcement.
The Euro (EUR) has also been dented this morning by the latest German trade data, as exports continued to contract and the trade surplus narrowed further than forecast in January. These fresh signs of weakness within the Eurozone’s powerhouse economy are likely to have increased pressure on the ECB to act decisively, with the economic outlook of the currency union decidedly muted.
EUR/NZD Exchange Rate Forecast: ‘Kiwi’ Predicted to Recover Further on Strong Manufacturing PMI
Should the ECB fail to live up to market expectations this afternoon the common currency can be expected to see another sharp appreciation in value, potentially pushing the EUR/NZD exchange rate into the region of a fresh high. If policymakers do opt to engage in more substantial monetary loosening then the Euro is likely to remain on a bearish trend ahead of the weekend.
Profit-taking has already seen the ‘Kiwi’ recover some of its lost ground, with a stronger Chinese Consumer Price Index also boosting demand for the commodity-correlated currency. Tonight’s New Zealand Manufacturing PMI could provide an additional boost for the New Zealand Dollar if the sector continues to demonstrate strong expansion.
Current EUR, NZD Exchange Rates
At the time of writing, the Euro to New Zealand Dollar (EUR/NZD) exchange rate was slumped in the region of 1.6409, while the New Zealand Dollar to Euro (NZD/EUR) pairing was making strong gains at 0.6090.