Euro to New Zealand Dollar Exchange Rate Fails to Recover
Despite mixed demand for the New Zealand Dollar (NZD), the Euro to New Zealand Dollar (EUR/NZD) exchange rate struggled to advance on Thursday morning. The pair began to tumble again following the afternoon’s European Central Bank (ECB) policy decision.
Since opening this week at the level of 1.6590, EUR/NZD has trended largely with a downside bias as higher demand for riskier trade-correlated currencies made the New Zealand Dollar more appealing.
EUR/NZD touched on a low of 1.6426 on Wednesday, before rebounding slightly. At the time of writing, EUR/NZD was trending near the level of 1.6525.
Investors have been hesitant to pile too much into the New Zealand Dollar, which is already near its best levels in months versus the Euro (EUR). Last week saw EUR/NZD touch a 2018 low of 1.6340.
Weaker New Zealand Dollar bullishness made it easier for the Euro to avoid further losses ahead of the European Central Bank’s (ECB) December policy decision on Thursday.
Following the decision though, the Euro slipped as investors perceived the bank’s tone as being dovish.
Euro (EUR) Exchange Rates Slide on European Central Bank’s (ECB) Caution
As was widely expected by economists, the European Central Bank (ECB) formally announced the end of its contentious and aggressive quantitative easing (QE) program during its December policy decision on Thursday.
However, ECB President Mario Draghi took a cautious tone regarding the bank’s economic and monetary policy outlooks going forward, which weighed heavily on the Euro on Thursday afternoon.
Draghi indicated that interest rate expectations were fine as they were, but market expectations for an ECB interest rate hike in 2019 are already dovish as slower Eurozone economic activity dampens bets.
Disappointing investors hoping for a more optimistic outlook from the bank, Draghi noted that downside risks to the economy were worsening and inflation will decrease in the coming months.
The ECB also cut its growth forecasts for 2018 and 2019.
Essentially, with the ECB acknowledging that its Eurozone growth expectations had worsened, the Euro weakened on Thursday.
New Zealand Dollar (NZD) Exchange Rates Strength Limited despite US-China Trade Hopes
The New Zealand Dollar struggled to hold its best levels against the Euro for most of Thursday’s session, as despite rising hopes for US-China trade de-escalations the New Zealand Dollar’s gains were limited.
As New Zealand’s trade ties to the US and China are not as strong as some other nations, for example, Australia, the New Zealand Dollar was not as heavily hit by US-China trade tensions and trade war escalation throughout the year.
This also means that the New Zealand Dollar’s gains on signs of de-escalations are weaker than some other currencies.
Essentially, with the New Zealand Dollar already relatively close to its best levels of the year versus the Euro, investors saw little reason to keep buying the relatively risky currency.
The New Zealand Dollar was also largely unaffected by New Zealand Treasury’s surplus forecast amid a lack of notable shifts or surprises.
Euro to New Zealand Dollar (EUR/NZD) Exchange Rate Investors Await Eurozone Data
The Euro is likely to continue to drive the Euro to New Zealand Dollar (EUR/NZD) exchange rate towards the end of the week, with some notable Eurozone ecostats due for publication on Friday.
Friday will see the publication of the Eurozone’s December PMI projections from Markit, which may give investors a better idea of how the Eurozone economy is performing at the end of the year.
Eurozone wage and labour cost data from Q3 will also be published.
If the data beats market expectations, it could make investors more optimistic that Eurozone growth will rebound towards the end of 2018 and begin 2019 on a slightly stronger note. This may help EUR/NZD to recover or advance at the end of the week.
Of course though, political or geopolitical developments will continue to have an influence on both currencies in the coming sessions as well.
The Euro may find further strength if Italy shows more willingness to be flexible regarding its controversial budget plans.
Meanwhile, the New Zealand Dollar exchange rate is unlikely to fall too far if US-China trade tensions continue to lighten and investors become more willing to buy riskier trade-correlated currencies.