The Euro Australian Dollar (EUR AUD) exchange rate continued to downtrend this morning as the International Monetary Fund (IMF) met with EU officials in Italy to discuss Greece’s debt relief.
On the side lines of a G7 meeting in the Italian city of Bari, talks are being held to discuss the conditions of any potential debt relief for Greece after a preliminary agreement to release additional bailout funds for the beleaguered economy.
While the IMF is adamant that debt relief is a prerequisite for its participation in any further bailouts it appears than this notion is not shared with all EU officials, as informal talks stalled on Thursday night amid worries about Athens’s ability to deliver upon its austerity promises, which are deeply unpopular back in Greece.
Jan Strupczewski writing for Reuters said;
‘They also said they could consider replacing more costly IMF loans to Greece with cheaper euro zone credit and transfer the profits made from a portfolio of Greek bonds bought by euro zone national central banks back to Athens.’
‘But all this could happen only if Greece delivers on its reforms by mid-2018 and only if a debt sustainability analysis shows Athens needs the debt relief to make its debt sustainable.’
The fall in the Euro comes despite an uptick in in Germany’s first quarter GDP as figures show that Europe’s largest economy grew 0.6% in the first three months of 2017, up from 0.4% in the previous quarter and leading Germany to become the fastest growing major economy in Q1.
The rise in growth was largely attributed to the revival of global trade and Germany’s construction sector which saw activity expand at a solid rate at the start of the year, however it was not enough to prompt a recovery in EUR AUD.
Meanwhile, the Australian Dollar was strengthened this morning as the recent volatility in commodity markets showed signs of abating as oil prices headed higher.
Prices for Australia’s largest export were also beginning to stabilise as iron ore held above $60 a tonne, allaying fears that the recent rout in Chinese commodity futures could push spot prices into the $50 a tonne bracket.
Markets reacted positively to the news as Australia’s recent budget suggests that should iron ore hold steady at its current levels over the next two quarters then tax receipts could jump by up to AU$900m.
Looking ahead, the EUR AUD exchange rate is likely to slip next week if the latest Eurozone GDP estimate shows that annualised growth slipped from 1.8% to 1.7% as forecast.
However an expected rise in the bloc’s latest ZEW Economic Sentiment index could prevent the Euro from any major losses.
Meanwhile the Australian Dollar may be weakened by the release of the minutes from the Reserve Bank of Australia’s (RBA) April policy meeting, should they signal that the bank is likely to maintain its neutral bias for the foreseeable future.
Current Interbank Exchange Rates
At the time of writing the EUR AUD exchange rate was trending around 1.4696 and the AUD EUR exchange rate was trending around 0.6803.