NZ dollar gains vs. euro as weak inflation prompts speculation of ECB stimulus

The New Zealand dollar rose against the euro as slowing European inflation prompted speculation of further stimulus from the European Central Bank.

The kiwi advanced to 61.69 euro cents at 8am in Wellington, from 61.44 cents at 5pm yesterday. The local currency edged lower to 77.91 US cents from 78 cents yesterday.

The euro weakened after data showing inflation in the euro region slowed to an annual 0.3 percent pace in September, from 0.4 percent the previous month, moving the region closer to deflation which the ECB is trying to avert. That increased speculation that the ECB may announce further stimulus measures to boost inflation at its meeting tomorrow.

“The latest inflation data suggests that price pressures in the region are non-existent as demand remains tepid and fears of disinflation begin to take hold,” Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management, said in a note. “The figures are likely to put further pressure on ECB to begin an aggressive easing programme in order to stimulate demand.”

ECB president Mario Draghi is likely to face questions tomorrow about any additional stimulus plans, BK’s Schlossberg said.

In New Zealand, the local focus is on the upcoming GlobalDairyTrade auction.

The New Zealand dollar was little changed at 89.06 Australian cents from 89.09 cents yesterday ahead of reports on Australian retail sales and Chinese manufacturing PMI. Chinese banks are closed today in observance of National Day.

The kiwi edged up to 48.08 British pence from 47.97 pence yesterday after UK second quarter gross domestic product was revised up to 0.9 percent from 0.8 percent.

The local currency gained to 85.45 yen from 85.26 yen ahead of the Tankan business survey which is expected to expected to show declines in activity in the third quarter.

The trade-weighted index was at 76.13 from 75.98 yesterday

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