Bias: bearish-to-range-bound: EUR/NZD is below its three-month average and sits in the lower half of the three-month range.
Key drivers:
• Rate gap: The ECB is expected to hold rates with a neutral tilt, while the RBNZ continues easing, widening the EUR-NZD gap and keeping euro bids modest against the kiwi.
• Risk/commodities: Oil remains above its long-run average and volatile, which tends to bolster the euro on inflation expectations and weigh on the risk-sensitive NZD.
• Macro factor: Upcoming New Zealand general election could shift policy expectations and add NZD volatility, keeping downside pressure on the kiwi.
Range: EUR/NZD is likely to drift within the recent band, with a gradual move toward the middle but no clear breakout.
What could change it:
• Upside risk: a surprise hawkish ECB signal or a jump in global risk appetite could lift euro demand and push EUR/NZD higher within the range.
• Downside risk: clearer NZD strength from domestic data or signs of less easing from the RBNZ could pull EUR/NZD toward the lower end.
