New Zealand Dollar Holds Ground Against Euro Despite Dairy Price Drop
Whole Milk Powder auctions have once again seen a drop in dairy prices, with the winning bid falling from the previous US$2,569 to $2,345. The New Zealand Dollar has dropped -0.7% against the Australian Dollar (AUD) and -0.5% against the Canadian Dollar (CAD), the Pound Sterling (GBP) and the US Dollar (USD). The Euro is the only currency the ‘Kiwi’ has experienced a rise against, with the exchange rate still trending up 0.1%.
Both the Euro and the New Zealand Dollar are suffering from weak demand and as such the EUR/NZD exchange rate is experiencing little movement today. Turmoil in the Eurozone is keeping the common currency low, while falling dairy prices and a strong US Dollar (USD) have prevented NZD gaining any ground.
EUR/NZD Exchange Rate Forecast: Greek Crises Has Ended, Portugal Turmoil Just Starting
The New Zealand Dollar is one of only two currencies that the Euro has managed to hold, or make, any ground against today. News of the current turbulence and the tragic Paris attacks has shaken the market, with the common currency down -0.4% against the Australian Dollar (AUD), the Canadian Dollar (CAD) and the South African Rand (ZAR), while losing -0.2% to Pound Sterling (GBP) and the Indian Rupee (INR).
While Greek tensions over the next tranche of bailout funding have been resolved, alleviating one pressure on the Eurozone, the political situation in Portugal looks set to continue for some time. There is a high likelihood that defeated Prime Minister Pedro Passos Coelho will appoint Antonio Costa, leader of the Socialist party, as temporary Prime Minister, with elections not being held for another six months.
This puts the future of Portuguese austerity in limbo, which is particularly bad timing considering Nova Banco needs to be sold by August 2016 in order to repay a €3.9 billion loan secured from the government, otherwise the country’s other banks will have to repay the debt.
The EUR/NZD exchange rate is currently trending in the region of 1.6481.
NZD/EUR Exchange Rate: Dairy Price Drop Sees New Zealand Dollar Failing to Gain on Flagging Euro
Falling dairy prices are one of the main concerns for the New Zealand economy, with products such as milk powder accounting for 25% of total exports. The last GlobalDairyTrade auction, held on the 3rd of November, saw a -7.4% drop in the price index, down to US$2,569. The result saw NZD slump across the board.
With the next auction due today the New Zealand Dollar could be in for another large depreciation. A continued drop in prices for New Zealand’s main export is likely to prompt the Reserve Bank of New Zealand (RBNZ) to consider additional stimulus methods. This speculation will drive the NZD/EUR exchange rate down, although Euro weakness could prevent considerable depreciation.
A drop in the expected two year rate of inflation, down to 1.85% from 1.94% has further hampered the ‘Kiwi’.
The NZD/EUR exchange rate is currently experiencing little movement to trend between 0.6050 and 0.6073.
EUR/NZD Exchange Rate Forecast: Little Movement Likely As Both Currencies Remain Weak
The detrimental bullish charge of the US Dollar (USD) is likely to continue today, with the release of the Consumer Price Index. A positive figure here will as-good-as remove doubts that the Fed will raise interest rates in December, strengthening the ‘Buck’ and pushing both the Euro and the New Zealand Dollar down.
While some data is due out today for the Eurozone, the current troubles are causing waves in the market, so the impact of positive figures is likely to be minimal. The New Zealand Dollar could make a decisive gain if the Diary Auction Average Winning Price, due later in today’s London session, rises above the previous US$2,568.80.
The EUR/NZD exchange rate is currently trending narrowly between 1.6416 and 1.6518.