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Euro to New Zealand Dollar Exchange Rate Slips on Brexit Forecasts and Inflation Rate Upset

Warning of EU Damage from Brexit Process Causes EUR/NZD Exchange Rate Decline

The Euro (EUR) has fallen to a level of NZ$1.7754 against the New Zealand Dollar (NZD) today, despite a lack of solid economic news of late.

The main factor reducing Euro demand has been the concern that Brexit could harm the EU as well as the UK, as predicted by UK Chancellor Philip Hammond.

On Monday, Mr Hammond warned that:

‘The International Monetary Fund (IMF) are clear today that [a] no-deal [Brexit] would be extremely costly for the UK as it would also for the EU.’

Another factor reducing demand for the Euro has been Monday’s Eurozone inflation rate figures, which revealed a slowdown in annual inflation.

While the year-on-year shift from 2.1% to 2% in August might seem small, it risks falling further and out of the European Central Bank (ECB) target range of ‘near 2%’.

Under-target inflation is less likely to trigger an ECB interest rate hike, so Euro traders have been disappointed by the news.

New Zealand Dollar to Euro Exchange Rate Rises despite Dairy Price Drop

The New Zealand Dollar (NZD) has risen against the Euro (EUR) today, hitting an interbank exchange rate of NZ$1.7758.

This appreciation follows a decline in US Dollar demand which has increased interest in ‘risky’ currencies like the New Zealand Dollar and Australian Dollar.

Other data concerning New Zealand hasn’t been as supportive – the latest Global Dairy Trade price index has revealed a -1.3% drop in prices.

This is negative news for New Zealand’s dairy farmers and dairy exporters, as this is a worsening of the previous -0.7% drop in prices.

Despite the handicap of this disappointing commodity news, the New Zealand Dollar has nonetheless still risen in value because of the US Dollar’s decline.

Euro to New Zealand Dollar Forecast: Will EUR/NZD Exchange Rate Slide on Slowing Eurozone Construction?

Looking ahead, the next major data that could affect the Euro to New Zealand Dollar (EUR/NZD) exchange rate will be Wednesday morning’s construction stats.

Covering Eurozone construction output in July, these readings are expected to show a year-on-year slowdown compared to July 2017 with a shift from 2.6% to 1.7%.

News of slowing construction sector output might lower confidence among Euro traders and cause a EUR/NZD exchange rate drop.

Beyond this data, the EUR/NZD pairing could also be affected by the evening’s New Zealand GDP growth rate stats for Q2 2018.

These are expected to show a faster pace of economic expansion on the quarter, but a converse slowdown on the year.

A forecast-matching monthly rise from 0.5% to 0.7% and annual slowdown from 2.7% to 2.5% might devalue the New Zealand Dollar, depending on trader reactions.

In the worst scenario, NZD traders might assume that slower GDP growth will delay the next Reserve Bank of New Zealand (RBNZ) interest rate hike.