Euro to New Zealand Dollar Exchange Rate Climbs on Hopes of Eurozone Reform
While the Euro (EUR) has been unable to hold its best levels this week due to European Central Bank (ECB) caution, the Euro to New Zealand Dollar (EUR/NZD) exchange rate has generally trended higher this week.
Last week, European Central Bank caution weakened the Euro despite trade jitters weighing on the New Zealand Dollar (NZD), causing EUR/NZD to slip from 1.6738 to 1.6700 throughout the week.
This week so far, EUR/NZD has recovered those losses. While EUR/NZD has been unable to hold Tuesday’s June high of 1.6820, it remained high and trended near 1.6770 at the time of writing.
ECB news has weighed on the Euro, but most other factors were in favour of bullish EUR/NZD trade.
Global concerns about a possible US-China trade war, weaker commodity trade, and signs that the Eurozone could see key integration reforms left the pair more appealing.
Investors are also hesitant to buy the New Zealand Dollar ahead of Thursday’s highly anticipated NZ growth report.
Euro (EUR) Exchange Rates Steady on Hopes for Strengthening Eurozone
While recent Eurozone economic data has been mixed and the European Central Bank (ECB) has taken a cautious stance regarding the possibility of Eurozone interest rate hikes, signs of progress in fiscal policy plans buoyed the Euro.
On Tuesday afternoon, Germany and France announced plans for a Eurozone budget following months of speculation from leaders over what form Eurozone reforms could take.
There would be obstacles for the plans, but German Chancellor Angela Merkel and French President Emmanuel Macron both showed confidence that the Eurozone budget would be in place by 2021.
The Euro’s gains on the news were limited. Markets were optimistic, but amid a lack of details uncertainty remained. According to Guntram Wolff from the think-tank Bruegel:
‘Everything depends on the details that are not yet known
But without finishing the banking union, the Eurozone will remain fragile,’
New Zealand Dollar (NZD) Exchange Rates Pressured by Trade Developments
It hasn’t been an entirely optimistic week for New Zealand Dollar investors and this has been the primary cause of EUR/NZD gains so far.
Market demand for risky commodity-correlated currencies like the New Zealand Dollar has been weak, due to fiery protectionist rhetoric from the US and signs of growing trade tensions between the US and China.
As well as growing trade war fears, falling dairy prices put additional pressure on the dairy-correlated New Zealand Dollar.
Domestic news has been mixed and has not been strong enough to support NZD trade. Westpac’s Q2 consumer confidence figure came in at -1.2%, though the Q1 current account figure beat expectations by rising to a surplus of NZ$0.18b.
Of course, demand for the New Zealand Dollar has also been limited ahead of Thursday’s highly anticipated NZ growth report.
Euro to New Zealand Dollar Forecast: New Zealand Growth Could Weaken NZD Further
The New Zealand Dollar has been unappealing this week due largely to global factors, but its selloff could extend if New Zealand’s upcoming Q1 Gross Domestic Product (GDP) report disappoints investors.
The Q1 growth figures will be published during Thursday’s Asian session and could set the tone for NZD trade for the remainder of the week.
New Zealand’s quarter-on-quarter growth rate is forecast to have slowed slightly, from 0.6% to 0.5%. The yearly growth rate is similarly expected to slip from 2.9% to 2.7%.
If the results fall short of expectations and indicate that NZ growth has been slower this year, EUR/NZD will continue climbing towards the end of the week.
On the other hand though, if the data beats expectations it could give the New Zealand Dollar the boost it needs to recover against the Euro.
The New Zealand Dollar recovery would be especially strong if US-China trade war jitters ease.
As for Eurozone news, Thursday’s Eurozone consumer confidence projections or Friday’s Eurozone PMI data could influence the Euro to New Zealand Dollar (EUR/NZD) exchange rate too.