The recent performance of the New Zealand dollar (NZD) against the Euro (EUR) has been influenced by various factors stemming from both domestic developments in New Zealand and broader economic conditions in the Eurozone. The NZD has seen a decline, particularly noted the currency trading at 7-day lows near 0.4927, which is 1.6% below its 3-month average of 0.5007. This movement has been attributed to a general deterioration in market risk appetite, overshadowing positive domestic data like the rise in business confidence.
Analysts indicate that the NZD's trajectory is heavily connected to market risk dynamics. If risk appetite continues to decline, further NZD losses may occur. Additionally, recent developments such as a significant cut in the official cash rate by the Reserve Bank of New Zealand (RBNZ) by 50 basis points—against a backdrop of rising inflation reaching 3%—indicate a more accommodative monetary policy. These factors are expected to exert downward pressure on the NZD.
In contrast, the euro has remained relatively muted despite stronger-than-expected GDP figures for the Eurozone and the European Central Bank (ECB) holding interest rates steady. Analysts suggest that the euro remains tied to movements of the US dollar, and geopolitical issues—particularly the ongoing war in Ukraine—continue to impact its stability. A moderation in inflation within the Eurozone may lead to speculation about potential future rate cuts by the ECB, which could keep the euro in check.
Further complicating the picture for EUR is the current state of oil prices, trading at approximately 65.07. This valuation is 1.7% below its 3-month average and reflects considerable volatility, which could influence the Eurozone's economies sensitive to energy prices. Should oil prices stabilize or increase significantly, this may indirectly impact inflation expectations and ECB policy.
In summary, the outlook for the NZD/EUR exchange rate remains clouded by internal monetary policy shifts and external geopolitical pressures. The NZD is expected to continue facing challenges amid a declining risk appetite and lower interest rates. In comparison, while the euro has some resilience due to ongoing economic growth, its performance will largely depend on ECB policies and external factors like energy prices and geopolitical stability.
