The EUR is well-positioned to benefit from global derisking, supported by its liquidity and the eurozone’s large current account surplus. In contrast, despite recent NZD strength, market expects its outperformance to fade amid slowing global growth, policy uncertainty, trade disruptions, and tighter financial conditions.

EUR: Still good to go

Over the past week, in the absence of significant domestic macroeconomic drivers, the EUR has continued to be influenced primarily by external factors. The recent strength of the euro is largely attributed to its position as the second most liquid currency globally and its role as a preferred alternative to the U.S. dollar in global FX reserves. Although recent comments from Trump and Besset temporarily eased some of the trade-related uncertainty—prompting mild profit-taking in the EUR—these relief-driven moves are expected to be short-lived, as market uncertainty remains largely unchanged. As such, as long as concerns over U.S. trade policy persist and sentiment toward the U.S. economy stays cautious, the EUR is likely to maintain its position as the dominant currency in the G10 FX space.

Looking ahead, the eurozone calendar is relatively light, with key data releases including the preliminary April CPI and Q1 GDP. However, the broader FX market narrative is expected to remain focused on U.S. trade policy developments. In this context, unless there is a material improvement in the outlook for U.S.-China trade relations, the baseline view for the EUR remains constructive—supported by its global liquidity status and continued appeal as a reserve currency alternative to the USD.

NZD: External factor driving

The Antipodean currencies—particularly the NZD—have been notable underperformers since the announcement of new U.S. tariffs, largely due to their high-beta characteristics and sensitivity to global risk sentiment. From a direct trade perspective, New Zealand faces limited exposure to the U.S., and although currently subject to a 10% tariff, it is under a 90-day pause. However, this temporary relief has done little to support the NZD, as the greater concern lies in the spillover effects from U.S.-China trade tensions, given New Zealand’s deep trade ties with China. As a result, the NZD remains particularly vulnerable to developments in the U.S.-China relationship. Despite this vulnerability, the NZD found temporary relief following comments from Trump suggesting a partial backtrack on tariffs with China. Further support to global risk sentiment came from Bessent, who expressed expectations for de-escalation and renewed negotiations, alongside Trump stating he would be “very nice” with China and that tariffs could be lowered “very substantially.” However, these positive developments are expected to be short-lived, as the prevailing uncertainty remains unchanged. In summary, ongoing trade conflict continues to represent a key downside risk for the NZD in the near term.

Looking ahead, the NZD calendar is quiet, with no major domestic events on the horizon. As such, market attention will remain focused on external factors—primarily U.S.-China trade dynamics. In the absence of any positive developments on the U.S. trade policy front, the NZD remains under pressure, with external uncertainties expected to continue dictating direction in the near term.

EUR/NZD 4H

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