NZD/EUR: Neutral state for the week ahead - Westpac

Imre Speizer, Research Analyst at Westpac, notes that the NZD/EUR briefly broke above the 0.6350-0.6800 expanding range it has resided in for the past few months but did not sustain the move, leaving it in a neutral state for the week ahead.

Key Quotes

“A reminder of ECB’s primary objective highlights why, with credit demand and growth so low, ECB has extended its QE. Core inflation, despite the rebounding of headline CPI, is stagnating under 1%, rather than pushing towards 2%. Though Draghi gave a more neutral economic outlook, he stressed that risks are mostly to the downside. The lack of any core inflation will keep ECB QE firmly in place, resulting in further downward pressure on the EUR.”

“Eurozone Dec inflation will be released early in January. On 21 Dec, ECB’s Bulletin will provide further assessments of EU growth and risks. Monte dei Paschi’s refinancing or bail-in deadline is 31 Dec.”

“3 months: Longer term, credit and political risks should weigh on the EUR. There are Dutch, French and German elections in 2017, and Italys banking system is fragile. NZD/EUR should remain above 0.66.”