A dramatic rise in Australian employment has seen the EUR/AUD exchange rate fall to a three-month low as political crises and uncertainty over the European Central Bank (ECB) weighs heavily on the Euro.
EUR/AUD Exchange Rate Slumps in the Wake of Political Uncertainty and Bullish Australian Dollar
Political turmoil is still weighing heavily on the Eurozone today. International lenders have demanded fresh austerity measures, with the next tranche of bailout funds currently being withheld until creditors are satisfied with the Greek government’s implementation of the required cuts. In response, Greek workers across the country are expected to strike today, leaving hospitals, public offices, ports and airports at a standstill.
Trader skittishness was further provoked by the collapse of the Portuguese government and the potential for an anti-austerity coalition to take power. A new left-wing government could see Portugal clashing with EU policymakers. Portugal requested a €78 billion bailout from the EU and International Monetary Fund (IMF) in 2011.
In a frank warning, Portuguese Finance Minister Maria Luis Albuquerque said, ‘Sadly, you only need to look at the recent history of one of our partners in the Euro, Greece, and the cost of the alleged end of austerity and the revolt against Europe’s rules to see the effect it has. What have they gained? More recession, more poverty, more unemployment and an increase of the dependency on European institutions and the IMF.’
The EUR/AUD exchange rate hit a low of 1.4983 today.
Australian Dollar to Euro (AUD/EUR) Bullish on the Back of Australian Employment Data
The ‘Aussie’ is up nearly 1.4% against the Euro, experiencing bullish gains courtesy of better-than-expected employment data. The Unemployment Rate for October fell to 5.9% rather than holding steady at 6.2%. Employment Change posted a dramatic result, smashing the forecast increase of 15k with 58.6k new jobs created. Full Time Employment Change was also positive, up 40k compared to the fall of over 10k experienced last month.
Australia’s rate of inflation has remained low at 1.5% in Q3 this year, but the Reserve Bank of Australia has remained optimistic. Today’s jobs data exceeded their expectations, giving the market confidence that the RBA will not cut interest rates in the coming month. The likelihood of a December rate cut has now dropped to 5%.
The AUD/EUR exchange rate hit a high of 0.6671 today.
EUR/AUD Exchange Rate Forecast: Draghi Speech Will Continue Euro Downtrend
The common currency suffered a further blow this morning during the European session with dovish comments from ECB President Mario Draghi suggesting that another round of monetary stimulus is required to boost the sluggish European economy.
‘Downside risks stemming from global growth and trade are clearly visible,’ Draghi told lawmakers at the European Parliament today. ‘Moreover, inflation dynamics have somewhat weakened, mainly due to lower oil prices and the delayed effects of the stronger Euro exchange rate seen earlier in the year.’ Draghi had previously stated that the ECB would intervene again if it expected inflation would fail to meet its 2% target within two years.
The Euro is currently at a three-month low against the Australian Dollar, trading between 1.4983 and 1.5235.