- Euro (EUR) Exchange Rates Cool – US Dollar gains push single currency lower
- Australian Dollar (AUD) Holds Gains – Profit taking on gold limites ‘Aussie’ appeal
- Federal Reserve Interest Rate Decision to Cause AUD/EUR Volatility – Accompanying press conference in focus
- EUR May struggle against ‘Brexit’ Fears – Most analysts fear the Euro will be hardest hit in the event of a ‘Brexit’
During Monday’s European session the Euro to Australian Dollar (EUR/AUD) exchange rate edged higher by around 0.3%. However, the ‘Aussie’ (AUD) is holding a comparatively strong position versus its major peers thanks to surging gold prices and reduced odds of a near-term Federal Reserve cash rate increase.
Euro (EUR) Exchange Rates Bolstered by Weidmann Speech
Despite the fact that most analysts think the Eurozone will be far harder hit in the long-term by a ‘Brexit’ than any other economy, the single currency has been little affected by EU referendum developments thus far.
Monday’s European session saw the shared currency rally versus its major peers in response to a hawkish speech from European Central Bank (ECB) policy maker and Bundesbank President Jens Weidmann. He argued that the central bank should give current stimulus measures more time to have an impact.
‘One thing I want to stress: our definition of price stability requires that the targeted inflation rate is achieved in the medium term,’ Weidmann told a conference in Frankfurt. ‘This gives us enough time to wait for the effect of the adopted monetary policy measures on prices.’
The Federal Reserve interest rate decision this week could have a marked impact on the single currency. The meeting itself is unlikely to cause market volatility given expectation that policymakers will hold rates, but the accompanying press conference should present clues as to policymaker outlook.
As we draw ever closer to the UK’s EU referendum there is a good chance that developments will have a greater impact on the shared currency.
The Euro to Australian Dollar (EUR/AUD) exchange rate is currently trending in the region of 1.5255.
Australian Dollar (AUD) Exchange Rate Gains despite Damp Market Sentiment
Mixed results from Chinese data caused global stock prices to fall, amplifying demand for safe-haven assets. Despite this, however, the Australian Dollar eked out gains versus most of its major peers during Monday’s European session.
One of the major factors supporting demand for the ‘Aussie’ was surging gold prices. However, many analysts predict prices to be turbulent on the day of the Fed interest rate decision.
‘Gold could push a little higher during the early part of the week, but we expect it to hit some turbulence by Wednesday, the day of the Fed meeting,’ Reuters quoted from a note by analyst Edward Meir.
‘That is when we expect the bank to signal that it is warming up to a rate increase for July,’ he added.
With most economists predicting that Federal Open Market Committee (FOMC) members will not consider altering monetary policy until after the conclusion of the EU referendum and Presidential election, however, there is a good chance that the Australian Dollar will continue to find support even if gold prices revert to downtrend.
The Euro to Australian Dollar (EUR/AUD) exchange rate dropped to a low of 1.5205 during Monday’s European session.
EUR/AUD Exchange Rate Forecast: Australian Consumer Inflation Expectation Data to Provoke Volatility
As mentioned above, the main focus for those trading the AUD/EUR exchange rate this week will be the FOMC interest rate decision. However, there will be a number of prior ecostats with potential to cause changes.
Tuesday’s Australian Consumer Inflation Expectation and NAB Business Confidence reports may cause ‘Aussie’ movement. Tuesday’s Eurozone Industrial Production for April should also be of interest.
In addition, Tuesday’s US Advance Retail Sales data should impact on the EUR/AUD pairing, although both assets will benefit from a weak result and vice versa.
Wednesday’s Australian Consumer Confidence report from Westpac should also be of significance, although the impact may be somewhat muted with the Fed rate decision due hours later.
The Euro to Australian Dollar (EUR/AUD) exchange rate reached a high of 1.5276 during Monday’s European session.