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EUR/AUD Exchange Rate Higher despite Euro Weakness, as Australian Deputy PM Joyce Resigns

Minor Gains for EUR/AUD Exchange Rate Thanks to Resignation of Deputy Australian Prime Minister Barnaby Joyce

The resignation of Australian Deputy Prime Minister Barnaby Joyce has caused jitters for the Australian Dollar today, allowing the Euro to Australian Dollar (EUR/AUD) exchange rate to claw some minor gains this morning.

Today’s Eurozone data has failed to support the Euro against its other major currency peers, with many figures either confirming forecasts or remaining in-line with previous estimates in their finalised forms.

The inflation outlook remains muted, with finalised Eurozone consumer price growth dipping from 1.4% to 1.3% and declining -0.9% month-on-month as expected.

Even a surprise uptick in core inflation growth from 1% to 1.2% has done little to excite markets; it’s still almost 0.8% below the European Central Bank’s (ECB) target rate, so policymakers are likely to maintain that there is no noticeable uptick in consumer price growth.

German data was also mixed, with private consumption and capital investment unexpectedly stagnating quarter-on-quarter, while government spending beat forecasts, as did export and import growth.

Overall this fails to build a conclusive picture of an economy in which price growth is set to strengthen, so the more positive figures have been somewhat overlooked today.

Resignation of Deputy PM Joyce Leaves Turbull Majority in Question and Boosts EUR/AUD Exchange Rate

The resignation of Australia’s Deputy Prime Minister and leader of the National Party Barnaby Joyce has caused some consternation for the markets today, allowing the EUR/AUD exchange rate to make gains despite Euro weakness elsewhere.

Joyce has spent the past two weeks embroiled in scandal after it emerged he started an affair with his current partner and former media advisor Vikki Campion, which led to questions regarding his ministerial conduct after Campion secured two unadvertised jobs within the National Party and accusations that Joyce had sought free housing as a gift from a businessman.

Leader of the National Party in Western Australia, Mia Davies, released a statement saying;

Mr Joyce’s actions have caused pain for his family but it is the ongoing damage he is causing The Nationals organisation that is of greatest concern to me as WA Leader.’

The Nationals brand across Western Australia has suffered as a result of Mr Joyce’s actions and he has become a distraction at both a federal and state level.’

My parliamentary colleagues and I have urged Mr Joyce to consider his position as leader in the best interests of the federal party and state branches.’

It is the view of the Parliamentary National Party of Western Australia that Joyce’s position as a Federal Leader is no longer tenable.’

His resignation has worried currency markets because Malcolm Turnbull’s Labour-led coalition only has a majority in Parliament of one seat; although Joyce has only resigned from leadership and retains his seat, there are concerns he could be forced out of Parliament altogether.

This would leave Turnbull virtually powerless and could force an election.

EUR/AUD Forecast to Move on Overseas Data as Canada Publishes Inflation Figures and US Policymakers Speak

With the day’s Eurozone data having already been released and the Australian data calendar remaining empty this afternoon and tonight, the EUR/AUD exchange rate is forecast to remain sluggish unless overseas developments create volatility.

US Federal Reserve officials William Dudley, Eric Rosengren and John Williams are set to speak at events today and could cause some volatility if they discuss the monetary policy outlook.

Although signs of a more hawkish outlook for interest rates could dent appetite for both the Euro and the Australian Dollar, the EUR/AUD exchange rate could benefit, as the risky ‘Aussie’ is more likely to be negatively affected.

Meanwhile, this afternoon’s Canadian consumer price index figures could push the Australian Dollar higher; forecasts are for inflation to have weakened in January, which could soften the appeal of CAD as a high-risk asset and therefore see AUD getting more attention.