EUR/NZD Exchange Rate Rises by 1.2% as NZ Market Confidence Dwindles on Surprise Rate Cut
The Euro New Zealand Dollar (EUR/NZD) soared by 1.2% today, leaving the pairing fluctuating around NZ$1.736 on the interbank market.
The New Zealand Dollar (NZD) plummeted against the Euro (EUR) following the Reserve Bank of New Zealand’s (RBNZ) interest rate decision, which surprised traders and was cut from 1.50% to 1%, despite the expected 1.25% cut.
Michael Every, a Strategist at Rabobank, said:
‘Not only that, we got [RBNZ] Governor [Adrian] Orr basically promising to do whatever it takes: more rates cuts, negative rates, QE – you name it. There will be no keeping the powder dry, he noted, and pushed for fiscal stimulus, openly stating this was due to the gloomy global backdrop.’
Last night also saw the publication of the New Zealand Global Dairy Trade Price Index which fell below forecast from 2.7% to -2.6%.
Anne Boniface, a Senior Economist at Westpac Bank, commented:
‘We have warned that Chinese demand is a key swing factor in the outlook for dairy prices over the coming year….recent developments suggest the outlook for Chinese consumer demand and global growth has deteriorated.’
EUR/NZD Exchange Rate Soars despite Falling German Industrial Production Figures in June
The Euro gained against the New Zealand Dollar despite this morning’s publication of the German industrial production figures for June, which fell below expectation from 0.3% to -1.5% – its worst annual drop in a decade.
As a result European currency traders are becoming increasingly concerned of a possible recession in Germany, the Eurozone’s largest economy.
Carsten Brzeski, a Chief Economist at ING, said:
‘Add to this a further escalation of the current trade conflicts, Brexit and an ongoing structural transformation in the automotive sector and the outlook doesn’t look any better. Against this background, recent tentative signs that the domestic economy’s resilience is crumbling are concerning.’
EUR has also benefited from alleviating US-China trade tensions following this week’s eruption after Beijing limited the Chinese Yuan in what was perceived as a direct retaliation against US tariffs.
EUR/NZD Outlook: European Central Bank Economic Bulletin in Focus
Euro traders will be looking ahead to the European Central Bank’s economic bulletin report tomorrow.
Any indications that the German economy could face recession in the near-term would prove Euro-negative.
US-China trade developments will remain in focus for New Zealand Dollar traders. If tensions ease between the two superpowers, and a negotiation of a trade deal appears more likely, this could boost the risk-sensitive ‘Kiwi’.
The EUR/NZD exchange rate is likely to remain volatile this week however, as Euro traders are likely to be focusing on the Eurozone’s economic developments as well as UK-EU Brexit uncertainty.