EURNZD Outlook: Likely to decrease, as the rate is below its recent average and near recent lows, with limited market catalysts.
Key drivers:
• Rate gap: The European Central Bank (ECB) is expected to maintain a neutral monetary policy, contrasting with the Reserve Bank of New Zealand's (RBNZ) easing cycle, creating pressure on the NZD.
• Risk/commodities: As oil prices trade at highs, the EUR outlook can be dampened because the Eurozone is sensitive to rising energy costs, which impacts inflation.
• One macro factor: Global trade tensions, particularly U.S. tariffs on New Zealand exports, add uncertainty for the NZD, potentially affecting its performance against the EUR.
Range: The EUR/NZD pair is likely to test lower levels within its recent range, drifting towards the limits after recent declines.
What could change it:
• Upside risk: A sudden improvement in Eurozone consumer confidence could provide support for the EUR.
• Downside risk: Continued RBNZ rate cuts may further weaken the NZD, enhancing the EUR's position.
