Euro to Australian Dollar Exchange Rate Trending Higher amid Reserve Bank of Australia Cut Bets
Despite a lack of support for the Euro (EUR) this week, and continued signs that the Eurozone economy is still suffering from a broad slowdown in growth, the Euro to Australian Dollar (EUR/AUD) exchange rate is on track to sustain gains.
Since opening this week at the level of 1.5713, EUR/AUD has been trending higher even as Eurozone data falls short.
On Wednesday morning, EUR/AUD briefly touched on a one month high of 1.5953 due to a sharp Australian Dollar (AUD) selloff, but since then the pair has steadied slightly and trended closer to the level of 1.5900 at the time of writing on Thursday.
The Euro has been unable to hold its best levels due to disappointing Eurozone data, but the rise in Reserve Bank of Australia (RBA) interest rate cut bets has still left the Australian Dollar even less appealing in comparison.
Euro (EUR) Exchange Rates Remain Unappealing amid Eurozone Economic and Political Jitters
The Euro was unable to hold its best levels versus a plummeting Australian Dollar, thanks to continued indication that the Eurozone’s economic activity was being buffeted by the global economic slowdown.
This week’s Eurozone data has largely fallen short of expectations, keeping pressure on the Euro and dampening hopes that the Eurozone economy is seeing a rebound from months of slowdown.
Eurozone consumer confidence unexpectedly deepened to -7.9 on Tuesday, while French and German business confidence were highly disappointing on Wednesday.
The German business confidence report from Ifo was especially concerning, and made investors more anxious about the divergence between the health of the US and Eurozone economies.
These stats followed last week’s disappointing Eurozone PMI reports.
On top of the economic jitters, investors were hesitant to buy the Euro ahead of an upcoming Spanish general election on Sunday.
Australian Dollar (AUD) Exchange Rates Fail to Rebound from Plummet
Despite the Eurozone’s recent poor data, and the Euro’s general weakness this week, the Euro to Australian Dollar exchange rate is still on track to register notable gains due largely to this week’s significant Australian Dollar losses.
In the middle of the week, the Australian Dollar was sold en masse in reaction to Australia’s Q1 Consumer Price Index (CPI) inflation rate report, which showed that Australian price pressures were weaker than expected.
Australian inflation was forecast to slow to 0.2% quarter-on-quarter, but the figure instead fell to a stagnant 0.0%. Similarly, the yearly inflation rate slowed from 1.8% to just 1.3% rather than the expected 1.5%.
Investors reacted with bearishness to the report, as speculation flared up that the Reserve Bank of Australia (RBA) could cut Australian interest rates in the next couple of months after all.
Strong Australian data earlier in the month had weakened RBA interest rate cut bets, but the fresh inflation data has caused the Australian Dollar to shed much of its recent appeal.
With analysts ramping up predictions that the RBA will cut Australian interest rates by June, the Australian Dollar failed to rebound much from yesterday’s plummet.
Euro to Australian Dollar (EUR/AUD) Exchange Rate Could Slide if Australian Trade Data Impresses
The Euro to Australian Dollar (EUR/AUD) exchange rate is still on track to sustain notable gains this week, as investors continue to bet that the Reserve Bank of Australia (RBA) will cut Australian interest rates in the next few months.
However, the Australian Dollar does have the potential to recover over the next week if upcoming Australian data is much stronger than expected.
Friday’s Asian session will see the publication of Australia’s Q1 import and export price figures. Trade is expected to have contracted throughout the quarter, but if it’s better than expected Australian Dollar investors may be more optimistic about Australia’s economic performance.
However, if the data is mixed or underwhelming, investors will continue to speculate that a Reserve Bank of Australia interest rate cut is on the way in the coming months, and EUR/AUD will be able to sustain most of its weekly gains.
Some French consumer confidence and jobseekers data will be published tomorrow as well, but the Euro to Australian Dollar (EUR/AUD) exchange rate’s biggest movements are likely to remain in relation to RBA interest rate cut bets this week.