A solid raft of finalised Eurozone manufacturing PMIs helped the Euro New Zealand Dollar exchange rate to regain some of its lost ground.
With the overall Eurozone manufacturing PMI rising to an 80-month high of 58.5 in October the currency union continues to demonstrate solid signs of growth.
Both the Spanish and Italian PMIs strongly bettered expectations, meanwhile, to further encourage the Euro.
Altogether this paints a positive picture of the domestic outlook at the start of the fourth quarter, raising the likelihood of the Eurozone outstripping US growth for the second year in a row.
Even so, this is unlikely to be enough incentive for the European Central Bank (ECB) to alter its monetary policy stance in the near future.
As further policy tightening remains a distant prospect the upside potential of EUR exchange rates remains somewhat limited.
However, the sense of political uncertainty that has dogged the single currency in recent weeks continued to ease ahead of the weekend.
As Catalonia looks increasingly unlikely to succeed in separating from Spain the appeal of the Euro could strengthen further in the coming days.
Neutral RBNZ Likely to Maintain Downside Pressure on New Zealand Dollar
The initial positive impact of Tuesday’s better-than-expected New Zealand labour market data started to fade, meanwhile.
Even though the decline in the unemployment rate suggests that the economy is in a stronger state than previously thought the ‘Kiwi’ remains under pressure from persistent political jitters.
With markets continuing to shy away from the New Zealand Dollar over the new centre-left government and its policy priorities there has been little in the way of sustained support.
Next week’s Reserve Bank of New Zealand (RBNZ) policy decision is unlikely to offer any particular boost to the antipodean currency, though, with policymakers set to maintain a neutral outlook.
As Dominick Stephens, Chief Economist at Westpac, noted:
‘We expect the OCR forecast to be the same as the August MPS – flat until 2019 and slowly rising beyond that.
‘The economic outlook has deteriorated, and the housing market is weaker than the RBNZ anticipated.
‘But the exchange rate has fallen sharply, meaning the overall outlook for medium term inflation is broadly unchanged.
‘The change of Government makes the economic outlook more uncertain. The RBNZ is better off waiting and seeing how Government policy evolves, rather than making bold changes at this point.
‘There would be very little financial market reaction to a neutral MPS along these lines.’
This could offer the EUR NZD exchange rate a solid rallying point, unless the RBNZ sounds a more positive note on the domestic economy.
Current EUR NZD Interbank Exchange Rates
At the time of writing, the Euro New Zealand Dollar exchange rate was trending in the region of 1.6866. Meanwhile, the New Zealand Dollar Euro exchange rate was trending narrowly in the region of 0.5928.