EUR/NZD – The Lady Isn’t Tapering

#OPINIONLEADER# #Signal#

 SEP 10, 2021

• ECB‘s slowing down of asset purchase not considered tapering
• RBNZ miles ahead of ECB in terms of policy normalization
• Potential downside on EUR/NZD below 1.66 handle

Chart 1: EUR/NZD D1 chart

The European Central Bank (ECB) got the market thinking for 45 minutes if its decision to reduce the pace of its Pandemic Emergency Purchase Programme (PEPP) is considered tapering when the monetary policy decision was announced yesterday. And when the ECB President Christine Lagarde addressed the public during the press conference, the answer was a clear no. She explained that the decision to slow down asset purchase “is to calibrate the pace of our purchases in order to deliver on our goal of favourable financing conditions”. That clarification sent the euro weakening throughout the press conference although it did recoup its losses post-conference.

Whether or not the ECB’s action is considered a tapering, the central bank is still lagging behind the Reserve Bank of New Zealand (RBNZ) in terms of progressing towards policy normalization since the latter has already ended quantitative easing and is looking to hike interest rate this month. At the moment, EUR/NZD is trading at the 1.66 handle. With the progress made in monetary policy coming from the RBNZ and more confusion on the matter of QE tapering coming from the ECB, euro is likely going to trade lower against the New Zealand dollar.

Trade Setup for EUR/NZD (D1)

Sell Stop at 1.6550

Upcoming major news that may impact price movement of EUR/NZD

10 September – European Central Bank President Lagarde speaking at 1730 (GMT+8)

16 September – New Zealand GDP q/q data release at 0645 (GMT+8)