NZD/EUR Outlook:
The NZD/EUR rate is currently above its recent average and near recent highs, suggesting a bullish outlook. The New Zealand dollar is supported by strong commodity prices and a hawkish stance from the Reserve Bank of New Zealand.
Key drivers:
• Rate gap: The Reserve Bank of New Zealand maintains a higher Official Cash Rate compared to the European Central Bank, which keeps the NZD attractive relative to the EUR.
• Risk/commodities: Recent oil price increases have boosted New Zealand's commodity outlook, directly benefiting the NZD amid global supply pressures.
• One macro factor: A trade deficit reported in New Zealand may weigh on the NZD, but it faces offsetting support from ongoing positive trends in the dairy sector.
Range:
The NZD is likely to drift within its 3-month range, with potential testing of recent highs.
What could change it:
• Upside risk: A stronger-than-expected increase in dairy prices could further support the NZD.
• Downside risk: Any significant downturn in global economic conditions or worsening trade figures could pressure the NZD lower.
