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EUR/AUD Exchange Rate Near Worst February Levels despite EU’s Optimism

EUR/AUD Exchange Rate Tumbles but Losses May be Limited 

Despite the EU showing a fairly upbeat stance on the Eurozone outlook, the Euro to Australian Dollar (EUR/AUD) exchange rate continues to trend lower this week. Investors are buying the Australian Dollar (AUD) as it benefits from global market sentiment. 

Weakness in the Euro (EUR) played a big part in last week’s EUR/AUD plunge. EUR/AUD opened last week at the level of 1.5881 and shed almost two cents, closing the week at the level of 1.5693. 

While movement this week has been steadier, EUR/AUD is still trending with a downside bias overall. At the time of writing on Thursday afternoon, EUR/AUD is trending near this week’s lows of 1.5627 – which are also the pair’s worst levels all month. 

Shifts in market sentiment are likely to drive Euro to Australian Dollar exchange rate movement in the coming sessions. 

Euro (EUR) Exchange Rates Pressured despite EU’s Optimism 

Today, the European Commission said it sees ‘light at the end of the tunnel’ in regards to the Eurozone’s coronavirus pandemic situation

The EC even said that the Eurozone will return to pre-crisis performance sooner than expected, in autumn. The commission expects that coronavirus vaccines will help economies return to normal. 

According to Valdis Dombrovskis, Chairman of the Commissioners Group on an Economy that Works for People: 

‘Today’s forecast provides real hope at a time of great uncertainty for us all. The solid expected pick-up of growth in the second half of this year shows very clearly that we are turning the corner in overcoming this crisis.’ 

However, a lack of upside surprises in the Eurozone outlook, as well as comments from European Central Bank (ECB) officials pointing to lasting dovishness, limited the Euro’s appeal against the Australian Dollar. 

Australian Dollar (AUD) Exchange Rates Appealing despite RBA’s Dovish Turn 

Last week, Australian Dollar investors were shocked by the Reserve Bank of Australia’s (RBA) suddenly dovish shift. Since then, the Australian Dollar’s previously broad appeal has been dampened and the currency has seen weaker performance. 

However, the Australian Dollar is still gaining against the mixed Euro due to global market optimism. 

The Australian Dollar is a risk and trade-correlated currency. It has been benefitting from global hopes of recovery from the coronavirus pandemic. 

According to Analysts at ING: 

‘AUD is facing a duality between domestic and external drivers. The recent dovish turn by the RBA has further reduced the appeal of the Aussie dollar’s positive carry, but the generalised upbeat market mood about the global recovery and the strong iron ore performance has continued to offer support to the currency.’ 

Euro to Australian Dollar (EUR/AUD) Exchange Rate Focused on Market Sentiment 

Amid a lack of notable Eurozone or Australian data due until next week, the Euro to Australian Dollar exchange rate will be driven by market sentiment through the end of the week. 

The Euro may struggle to recover this week’s losses unless there is a shift in movement or a surprising upside in EU news. 

Amid global coronavirus vaccine and recovery hopes, global market sentiment is fairly optimistic. This could keep the Australian Dollar appealing for now, and help the currency to avoid losses on the recently mixed domestic outlook. 

Of course, any shifts in the global coronavirus situation could influence sentiment as well. If coronavirus vaccine uncertainties worsen, investors may be hesitant to take risks and EUR/AUD may be more likely to recover. 

Amid a lack of surprises though, Euro to Australian Dollar (EUR/AUD) exchange rate investors will be awaiting next week’s key data including Eurozone growth rate results.