Stronger German Inflation Fails to Bolster Euro (EUR) Exchange Rate Demand
Despite a weaker NBNZ Business Confidence index the Euro to New Zealand Dollar (EUR/NZD) exchange rate has remained on a downtrend on Thursday morning. While yesterday’s German Consumer Price Index showed a stronger-than-expected uptick the Euro has struggled to make particular gains against rivals, with the EUR/NZD pairing trending narrowly around 1.6419.
Ahead of the latest German Consumer Price Index the Euro (EUR) has been trending lower against the New Zealand Dollar (NZD), with risk appetite improved by dovish Fed commentary.
Central Bank Speculation Dominated Trading on Euro to New Zealand Dollar (EUR/NZD) Exchange Rate
Speculation over the monetary policy outlook of the Federal Open Market Committee (FOMC) has proven the most dominant influence over both the Euro (EUR) and the New Zealand Dollar (NZD) this week. Although Monday’s US Personal Consumption Expenditure figures showed that inflationary pressure had not risen as expected on the year in February investors continued to take a more bullish view of the US Dollar (USD).
While this somewhat discouraged risk appetite and dented the appeal of the commodity-correlated ‘Kiwi’ the Euro to New Zealand Dollar (EUR/NZD) exchange rate nevertheless began to cede ground on the back of this report. In spite of Eurozone Household Credit Growth advancing at a faster rate than traders had anticipated concerns over further policy divergence between the FOMC and European Central Bank (ECB) dragged on the appeal of the single currency.
Dovish Yellen Commentary Drives up Demand for New Zealand Dollar (NZD) Today
Overnight Fed Chair Janet Yellen encouraged a further resurgence in risk appetite by offering a stark contrast to the more hawkish comments given by other members of the FOMC in recent days. Dampening suggestions that the Fed could consider an interest rate hike as soon as April, this has seen the EUR/NZD exchange rate continue to slump on Wednesday morning.
As this return to dovishness for the Fed is likely to dial back pressure on the Reserve Bank of New Zealand (RBNZ) to consider another imminent interest rate cut demand for the ‘Kiwi’ has risen sharply. With the encouragement that the Fed’s monetary tightening cycle could remain stagnant for some time to come the risk-sensitive New Zealand Dollar has trended higher, despite continuing concerns over the domestic dairy industry.
EUR/NZD Exchange Rate Forecast: Euro Predicted to Strengthen on German Inflation Data
This afternoon’s German Consumer Price Index figure is likely to provoke further volatility for the EUR/NZD exchange rate. As low inflationary pressure remains a key concern for the ECB, investors will be keen to see if there has been any uptick within the Eurozone’s powerhouse economy. Expectations suggest that inflation climbed 0.1% on the year in March which would offer some encouragement that conditions are improving, albeit slowly.
Tomorrow’s NBNZ Business Confidence report could help the New Zealand Dollar to extend its recent gains further, providing domestic sentiment is shown to have strengthened on the month.
Current EUR, NZD Exchange Rates
At the time of writing, the Euro to New Zealand Dollar (EUR/NZD) exchange rate was slumped at 1.6358, while the New Zealand Dollar to Euro (NZD/EUR) pairing was making strong gains around 0.6111.