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Euro New Zealand Dollar Strengthens as Populist Fears Recede

The Euro (EUR) rallied from weekly lows against the New Zealand Dollar (NZD) yesterday as markets shrugged off some of their concerns over the impact of populism in the European Union.

Following the upsets of both Brexit and Trump last year, many analysts initially predicted that a similar wave of populism could sweep over Europe ahead of a number of major national elections.

With the French Presidential elections set to begin in less than a month, traders have been focused on the performance of far-right candidate Marine Le Pen who campaigns on the policy of pulling France out of the EU.

However, following the defeat of Geert Wilders in the Dutch elections last week EUR investors are increasingly confident that voters in the EU are beginning to shun populism.

Julie Gaillot, an analyst at the Institut CSA polling agency said;

‘After the elections in the Netherlands and Austria, we see that Euroskepticism has more or less maxed out and is now stagnating or declining. In France, Brexit has made people worried about leaving … We are observing an increase in attachment to the European Union.’

The Euro was also buoyed by the performance of independent candidate and current frontrunner Emmanuel Macron in the first French TV debate, with his compelling tone and calm manner winning him praise from observers and setting back Le Pen’s campaign.

But with over a month to go before the final vote and Le Pen’s message on security continuing to resonate with voters following a string of deadly attacks in France, the Euro is still likely to witness some volatility over the coming weeks.

The EUR NZD exchange rate also failed to push much higher in trading on Wednesday as the European Central Bank (ECB) reported a fall in the Eurozone’s Current Account surplus.

Data showed that the surplus fell to €2.5bn in January, down from an all-time high of €46.9bn the month before.

The drop was largely attributed to a weak trade balance at the start of the year as exports from the Eurozone fell dramatically, although unusually high transfer payments out of the bloc also contributed to the dramatic fall in the Eurozone’s reserves.

Meanwhile the New Zealand Dollar failed to hold onto its gains following a rise in dairy prices at the latest Global Dairy Auction yesterday.

The ‘Kiwi’ briefly spiked by around half a cent yesterday as dairy prices rose 1.7%, ending a short run of contractions. The price for New Zealand’s largest export, whole milking, climbed 2.9%.

However with concerns that the dairy market will struggle to mimic the consistent price rises seen late last year, markets were quick to dismiss the result, leading the New Zealand Dollar to relinquish its gains almost immediately.

Looking ahead, the Euro may attempt to advance further on Thursday with the release of the Eurozone’s Consumer Confidence survey, with analysts predicting that sentiment will rise from -6.2 to -5.7 in March as political concerns begin to recede.

Meanwhile NZD investors will be focused on the Reserve Bank of New Zealand’s (RBNZ) latest policy meeting later this evening.

While the Bank is expected to vote to leave interest rates unchanged, the New Zealand Dollar could tumble again should the RBNZ’s outlook be dovish in tone.

Current Interbank Exchange Rates

At the time of writing the EUR NZD exchange rate was trending around 1.53 and the NZD EUR exchange rate was trending around 0.65.