EUR/NZD Outlook: Likely to decrease, as the rate is below its recent average and near its recent lows, influenced by current economic conditions.
Key drivers:
• Rate gap: The European Central Bank maintains a neutral policy, while New Zealand's Reserve Bank has recently cut interest rates to encourage growth, creating a favorable gap for NZD.
• Risk/commodities: With oil prices significantly above their average, the euro may weaken further against the NZD, as rising energy costs strain the Eurozone economy.
• One macro factor: New Zealand's private sector contraction in December signals economic challenges, which may hinder the NZD's upward momentum.
Range: EUR/NZD is likely to drift lower as it continues to trade below its recent average, with limited volatility expected.
What could change it:
• Upside risk: A significant improvement in Eurozone economic data could bolster the euro against the kiwi.
• Downside risk: Ongoing trade tensions and any negative economic developments in New Zealand could lead to further declines in the NZD.
