- EUR AUD Exchange Rate Fluctuates this Week – Push and pull between weakened currencies
- Euro Edges Higher after Brexit-Lows – Pound-associated Euro given room to breathe
- Australian Dollar Hit by Chinese News – PBoC willing to let Chinese Yuan weaken considerably
- Forecast: Markets Await Central Bank News – BoE and RBA expected in the next week
The EUR AUD exchange rate edged higher on Thursday as sentiment towards European currencies lightened following last week’s shocking Brexit vote. The Euro also gained as the Australian Dollar was dragged down by news from China, Australia’s biggest trade partner.
At the time of writing, the Euro to Australian Dollar exchange rate trended in the region of 1.4955. The pair has fluctuated considerably this week, hitting a high of 1.5038 and a low of 1.4826.
Euro (EUR) Allowed to Gain as Market Sentiment Calms
Next to the British Pound (GBP), the Euro has been the currency most harshly affected by last week’s news that Britain voted to leave the European Union.
The EU-tied Euro has been considerably weighed down by market fear that other nations, even ones in the Eurozone, could follow Britain and leave the EU (and Euro) as Euroscepticism rises across the bloc.
However, as Britain and the EU remain in potentially deadend negotiations this week, investors have taken the opportunity to repurchase the Euro, and Pound, from the low levels they dropped to.
While the Euro didn’t drop considerably against the risky ‘Aussie’ on Friday like Sterling did, it has attempted to return to last week’s levels regardless. EUR/AUD hit a high of 1.5286 on Monday last week.
The Euro may also have been boosted by hopes that the European Central Bank (ECB) would not be introducing new Brexit-related easing measures after all, despite widespread speculation that they would. According to the Financial Times;
Vítor Constâncio, the European Central Bank’s vice-president, has played down Brexit’s possible economic impact on the eurozone and has indicated that he expects the single-currency area to weather the blow. …
The ECB’s current view of how the Brexit decision could affect the eurozone is broadly in line with private sector forecasts, which suggest that the UK’s vote to leave could cost the bloc 0.5 percentage points of GDP over three years. “It’s not optimism. It’s about trying to stay objective and calm in the face of what’s going on,” the vice-president said.
Australian Dollar (AUD) Dragged Lower by Chinese News
Despite its attempts to remain sturdy on positive economic and commodity news, the Australian Dollar slipped against many rivals on Thursday – including the Euro.
Investors had previously favoured the ‘Aussie’ as growth news had been strong, with some analysts hoping that Australia could weather the Brexit shock. Prices of iron ore, Australia’s most lucrative commodity, had also remained strong.
However, the Australian Dollar’s favour ran low due to news from China, an important trade partner for Australia. Reuters reports;
‘China’s yuan sank to a six-month low against the dollar in offshore trade on Thursday and the Australian dollar fell almost one percent after Reuters reported the People’s Bank of China (PBoC) is willing to let the Chinese currency weaken to 6.80 per dollar. …
“The Aussie and the yuan have just taken a big knock on that story,” said Sam Lynton-Brown, a currency strategist with French bank BNP Paribas in London. “The Aussie is now by far the biggest mover among the major currencies today as a result.” ’
The Chinese Yuan (CNY) already remains close to its lowest levels in around five years. This news shocked investors, dragging the Yuan and related currencies like the ‘Aussie’ lower.
EUR AUD Exchange Rate Forecast: Central Bank News Highly Anticipated
The Euro to Australian Dollar exchange rate is likely to see further mixed movement in the coming days as global markets remain calm in the eye of the Brexit storm.
Previous bets that the European Central Bank (ECB) would be introducing easing measures or stimulus in order to stave off any Brexit-related damage have eased in the last few days.
However, investors still highly anticipate a speech from ECB President Mario Draghi on his in-depth thoughts on the Brexit’s affects. They’re also hoping for some indication of what steps could be taken going forward.
The Reserve Bank of Australia (RBA) is also expected to react to Britain’s global shock next week when it holds its July policy decision meeting. Some investors expect that the RBA will introduce new easing measures in order to stave off an overvalued Aussie as well as potential Brexit-related damage.
It is also highly like that the Bank of England (BoE) Governor’s speech on Thursday afternoon will influence major currencies in some way if he announces new monetary policy for Britain.
At the time of writing, the EUR AUD exchange rate trended in the region of 1.4955, while the AUD EUR exchange rate traded at around 0.6685.