MUFG Research flags the divergence between the RBNZ and the ECB policy expectations.
"The stronger kiwi has been triggered by the announcement overnight from the RBNZ that they have dropped their easing bias. The RBNZ’s updated forecasts for the key policy rate show that it is now expected to bottom at 1.00% rather than 0.9%, and by June 2021 the key policy rate is expected to be 20 basis points higher than projected back in November," MUFG notes.
"The euro briefly dropped below the 1.0900-level yesterday against the US dollar driven by building speculation over further ECB easing. The euro sell off was triggered by the release of a report from Market News stating that the chances are rising of an ECB rate cut if the euro-zone economic data continues to disappoint and the coronavirus persists as a threat to global trade according to unnamed ECB officials. The latest round of “disappointing” economic data from the euro-zone revealed that the euro-zone economy was close to stagnating at the end of last year, while the French, Italian and German economies likely contracted in Q4," MUFG adds.