EUR/NZD Outlook:
The EUR/NZD exchange rate is slightly weaker, but likely to move sideways as it remains below its 90-day average and near recent lows. The current geopolitical tension and economic concerns in the Eurozone are limiting upward momentum.
Key drivers:
• Rate gap: The European Central Bank is maintaining an accommodative policy, while the Reserve Bank of New Zealand appears more hawkish, aiming to control domestic inflation.
• Risk/commodities: Rising oil prices are straining the Eurozone's economic recovery, as increasing energy costs add pressure to inflation, which typically weakens the euro.
• One macro factor: Cautious market behavior following Germany’s declining economic sentiment may weigh on the euro in the near term, while hints of stability in the NZD could maintain its value.
Range:
The EUR/NZD pair is expected to drift within its recent range, with possible fluctuations but no significant testing of extremes.
What could change it:
• Upside risk: A surprising improvement in Eurozone economic indicators could support euro strength against the NZD.
• Downside risk: A more cautious tone from the RBNZ than expected may lead to NZD weakness, impacting the exchange rate.
