NZD/EUR rally could extend to 0.6195 - Westpac

NZD/EUR’s rally since Dec could extend to 0.6195 - the Sep high, suggests Imre Speizer, Research Analyst at Westpac.

Key Quotes

“Economic data momentum has slipped during the past two months, leaving the ECB comfortably on hold. The event calendar over the holiday period includes a Eurogroup meeting (22 Jan), and an ECB decision (25 Jan).”

“3 months ahead: Slack in the economy remains so that wage growth and core inflation have failed to make much progress. Merkel’s CDU/ CSU is struggling to form an effective coalition and may be reduced in effectiveness once any agreement is found. Italy is going to the polls on 4 Mar under new electoral rules which are likely to lead to a broad coalition. This backdrop should affirm ECB’s easy policy stance unless there is a surprise wage/inflation shock. Consequently, EUR is likely to struggle early in 2018, although could still outperform the NZD which will lose its “high-yielder” identity. NZD/EUR could gravitate lower towards 0.56.”