EUR/NZD falls ahead of Euro Area inflation data as French CPI picks up

The Euro weakened against the New Zealand Dollar on Thursday, after data showed French consumer price inflation had accelerated in August and German retail sales had unexpectedly dropped in July.

France’s annual CPI inflation came in at 4.8% in August, picking up from 4.3% in July and also exceeding market consensus of 4.6%.

The inflation figure remained well above the European Central Bank’s 2% target, mostly due to a rebound in energy prices.

A separate report showed earlier in the day that Germany’s retail sales had decreased at the steepest monthly rate since March in July, by 0.8%, against market expectations of a 0.3% growth.

In annual terms, German retail trade shrank 2.2% in July, or much faster than expected. The data indicated that persistently high inflation continued to weigh on consumer demand.

Markets have priced in an almost 50% chance of a rate hike by the European Central Bank in September.

Next on Thursday’s macro data front are the reports on unemployment in Germany, Italy and the Euro Area as a whole as well as the preliminary inflation figures for Italy and the Euro Area for August.

The headline annual CPI inflation in the Euro Area is expected to have slowed down to 5.1% in August from 5.3% in July. The core CPI inflation probably decelerated to 5.3% in August from 5.5% in July.

Meanwhile, with the Reserve Bank of New Zealand’s policy tightening cycle likely over, business confidence in New Zealand rose to its highest level since June 2021 in August.

The ANZ Business Outlook Index came in at -3.7 in August up from -13.1 in July, but it still registered the 26th consecutive month of negative readings.

The kiwi dollar also received certain support after a modest upside surprise in the latest Chinese manufacturing survey. The NBS Manufacturing PMI came in at a reading of 49.7 in August up from 49.3 in July, while topping market consensus.

The latest figure pointed to the softest decrease in manufacturing activity since an expansion in March amid a number of stimulus measures from the Chinese government to reinvigorate economic recovery.

As of 7:20 GMT on Thursday EUR/NZD was edging down 0.31% to trade at 1.8283. The minor Forex pair has retreated 0.97% from the 40 1/2-month high of 1.8462, which it registered on August 21st.