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Euro to New Zealand Dollar Exchange Rate Advances despite Underwhelming Eurozone Inflation

Euro to New Zealand Dollar Exchange Rate Benefits as New Zealand Inflation Remains Subdued

Despite underwhelming Eurozone ecostats in recent sessions, the Euro to New Zealand Dollar (EUR/NZD) exchange rate has advanced away from last week’s multi-month low over the past few days.

Last week saw EUR/NZD touch on its lowest level since January 2018 – 1.6675. Since then the pair has climbed, though only slightly. On Thursday morning, EUR/NZD touched a weekly high of 1.6933.

This was more due to broad New Zealand Dollar (NZD) weakness this week than any particular Euro (EUR) demand.

New Zealand’s Q1 inflation rate did generally meet expectations, but this still indicated to investors that the Reserve Bank of New Zealand’s (RBNZ) neutral monetary policy outlook was unlikely to change any time soon.

News that prices of major commodities had risen this week also did little to support the risky, commodity correlated NZD due to concerns of long-term subdued inflation in New Zealand.

Euro (EUR) Exchange Rate Gains Limited as Eurozone Inflation Falls Short

The Euro has advanced against the New Zealand Dollar  this week, despite a general lack of supportive Eurozone data.

Wednesday saw the publication of the Eurozone’s final March Consumer Price Index (CPI) results, which met expectations in most prints. Monthly inflation rose from 0.2% to 1% as expected, while the core inflation rate remained at 1% year-on-year as forecast.

However, the overall yearly inflation rate only climbed from 1.1% to 1.3%, missing the projected 1.4%.

This weighed on market hopes that the European Central Bank (ECB) could soon take a more hawkish tone on Eurozone monetary policy.

Markets are betting that the ECB could hike Eurozone interest rates at the end of Q2 2019 at the earliest, but many analysts predict that would still be too early.

Other Eurozone data has also weighed on the shared currency’s appeal this week.

Wednesday’s Eurozone construction output report came in well below forecasts, as did ZEW’s April economic sentiment survey results on Tuesday.

New Zealand Dollar (NZD) Exchange Rates Weaken on Inflation Report

While New Zealand inflation met expectations in the Q1 2018 report, this was generally disappointing to investors.

New Zealand’s quarter-on-quarter inflation rate rose from 0.1% to 0.5% as expected, while the yearly inflation rate slipped from 1.6% to just 1.1% as forecast.

According to ASB Bank chief economist Nick Tuffley:

‘Today’s result reiterates our view that the RBNZ will leave the OCR on hold well into 2019,’

Market bearishness about the NZ inflation outlook kept the New Zealand Dollar weak, despite stronger commodity prices.

Prices of dairy, New Zealand’s most lucrative commodity, rose to their best levels since February this week. However, this news was not enough to boost NZD demand.

Euro to New Zealand Dollar (EUR/NZD) Forecast: Central Bank Speculation Remains in Focus

Recent Euro to New Zealand Dollar (EUR/NZD) exchange rate movement has been driven by central bank speculation. Amid a lack of notable datasets due for publication in the coming days this is likely to continue.

Friday will see the publication of the Eurozone’s April consumer confidence projection which could give the Euro a boost if it impresses. On the other hand though, EUR/NZD is unlikely to see a significant shift in direction either way.

Any comments from European Central Bank (ECB) officials could influence the Euro if they surprise traders at all, but overall EUR/NZD is on track to sustain modest gains this week.

Next week is more likely to be influential for EUR/NZD, as the Eurozone’s preliminary April PMIs from Markit will be published.

Of course, it will be a major week for central bank news too as the European Central Bank will hold its April policy decision, which could potentially have a big impact on the Euro to New Zealand Dollar (EUR/NZD) exchange rate.