Italian Political Turmoil Curbs Demand for the Euro (EUR)
The Euro New Zealand Dollar (EUR/NZD) exchange rate took a tumble today as markets responded to news that Italy’s anti-establishment 5-Star Movement and the League are set to choose a presidential candidate.
This would be another step towards the implementation of a resoundingly Euro-sceptic coalition, an event that investors are worried will endanger the value of the Euro.
Beyond this, the financial markets are concerned that the new government will go on a spending spree and increase the country’s already sizable debt pile, whilst also contravening European Union fiscal rules.
This sentiment weighed heavily on the single currency, with today’s sparse data calendar leaving the market focus firmly on Italy’s political backdrop.
New Zealand Dollar (NZD) Exchange Rates Bolstered as US and China put Trade War ‘On Hold’
The New Zealand Dollar (NZD) traded higher on Monday, propelled by news that the United States and China have put their potential trade war ‘on hold’ whilst they work on a wider agreement.
US Treasury Secretary Steven Mnuchin announced on Sunday that both nations had agreed to drop their billion dollar tariff threats, with China agreeing to work on ‘expanding trade and protecting intellectual property’, whilst also substantially reducing the US trade deficit on goods.
US President Donald Trump and the Whitehouse have held these conditions for some time and many investors are now happy to see that this could soon be achieved.
‘We’re putting the trade war on hold’, Mr Mnuchin stated.
‘Right now, we have agreed to put the tariffs on hold while we try to execute the framework’.
Talks will likely be ongoing, but the ‘Kiwi’ Dollar is already seeing a resurgence in demand as risk aversion ebbs and appetite returns.
Eurozone PMI in the Spotlight – Euro New Zealand Dollar (EUR/NZD) Exchange Rate Forecast
Looking ahead, the Euro New Zealand Dollar (EUR/NZD) exchange rate could encounter even more volatility this week as investors respond to Wednesday’s looming Markit Purchasing Managers’ Index (PMI) release.
This will include preliminary estimates for the Eurozone services and manufacturing sectors –a useful activity gauge for the health of the bloc’s economy.
These readings will be all the more significant because they will shed light on whether the bloc’s economic slowdown has continued into the second quarter – with any evidence of easing growth liable to kick the EUR/NZD exchange rate even lower.
This could, in turn, curb investor hopes that the European Central Bank (ECB) will remove their emergency stimulus measures after September 2018, an event that would leave the ECB as one of the most major central banks moving into 2019.