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Improved Eurozone Consumer Confidence Fails to Buoy Euro New Zealand Dollar Rate

Some of the steam left the Euro New Zealand Dollar exchange rate at the start of the new week, with the bearishness of the ‘Kiwi’ starting to subside.

While markets remain wary of the new centre-left government and its different policy priorities the New Zealand Dollar was able to find some support on Monday, largely due to technical factors.

The mood towards the single currency, meanwhile, deteriorated sharply as signs still point towards the Catalan crisis rumbling on for some days yet.

Even now that the Spanish government has invoked article 155 to trigger the imposition of direct rule the Catalan regional administration has maintained a generally defiant stance.

As the possibility of a unilateral declaration of independence remains on the table this naturally worries investors, leaving the Euro biased to the downside.

However, the EUR NZD exchange rate remains well-supported by the positive nature of underlying Eurozone data.

A stronger-than-expected uptick in October’s Eurozone consumer confidence index helped to limit the losses of the Euro, pointing towards the economic resilience of the currency union as a whole.

As Bert Colijn, Senior Economist at ING, noted:

‘Consumer confidence increased from -1.2 to -1 in October, indicating that the euphoric environment has carried over into the final quarter of 2017. Consumers have little to worry about at the moment. Even though the detailed breakdown of this month’s numbers have yet to be released, consumers indicated over recent months that their household financial situation has been improving and the amount of major purchases that households are making have jumped as well. This comes on the back of modest improvements in wages and moderate inflation. This is a positive sign for household consumption and we expect domestic demand to remain strong for the final quarter.’

Solid Eurozone PMIs to Limit Euro Downside

Demand for the single currency could pick up more substantially on the back of the latest raft of Eurozone manufacturing and services PMIs.

While forecasts point towards some softening in economic activity on the month the figures are likely to remain relatively bullish on the whole.

As long as there are no significant downside surprises then this may return the EUR NZD exchange rate to a stronger footing, especially if market risk appetite remains generally limited.

However, as markets brace for Thursday’s European Central Bank (ECB) policy meeting the upside potential of EUR exchange rates is likely to remain somewhat muted.

On the other hand, the New Zealand Dollar may struggle to shake off its downside bias as investors await the announcement of the cabinet line-up.

Once the policy outlook of the Labour-led coalition starts to become clearer, though, the EUR NZD exchange rate could see some reversal of its recent gains.

Current EUR NZD Interbank Exchange Rates

At the time of writing, the Euro New Zealand Dollar exchange rate was slumped in the region of 1.6854. Meanwhile, the New Zealand Dollar Euro exchange rate was making solid gains around 0.5931.