The Euro (EUR) has lost ground to the Australian Dollar (AUD) this afternoon, ahead of two days of key EU meetings.
Among the topics up for discussion will be the current state of Brexit talks, Eurozone reform and how the EU will deal with migration in the future.
All three of these topics threaten to expose deep divisions among Eurozone and EU members, which could cause EUR/AUD exchange rate losses until the weekend.
(Last updated 27th June, 2018)
Fears of Division on Eurozone Common Budget Cause EUR/AUD Exchange Rate Decline
There have been minor Euro losses elsewhere; this is down to market unrest at signs of a possible difference of opinion on a common Eurozone budget.
The budget was proposed by French President Emmanuel Macron and eventually supported by German Chancellor Angela Merkel, but has faced troubles.
The latest sign of difficulties has come from Portuguese Finance Minister Mario Centeno, who has warned that:
‘Differences of views remain on the need for and the possible features of a Eurozone budget.’
In addition to potential Portuguese scepticism, there has been additional unrest from the Netherlands where Dutch Finance Minister Wopke Hoekstra has said:
‘When it comes to fiscal capacity, I didn’t say for nothing that I do not see which issue this will solve.’
It isn’t unthinkable that these differences will be resolved in the future, but for the time being signs of disunity among Eurozone members have weakened the Euro.
Australian Dollar to Euro (AUD/EUR) Exchange Rate Rises as Calls for RBA Rate Hike Grow
Despite a limited amount of Australian economic news today, the Australian Dollar (AUD) has still made a small advance against the Euro (EUR).
This appreciation has made AU$1 worth €0.6337, which represents a recovery for the AUD on the way back to Monday’s high of €0.6383.
The only notable AU news has been a push for the Reserve Bank of Australia (RBA) to consider an imminent interest rate hike.
Previously, former RBA policymaker Warwick McKibbin stated that when it comes to future monetary policy:
‘If the argument is “we can’t raise rates because if we do we could make the housing market a lot worse”, or prick some other asset bubble and cause a shock, it’s better to raise rates now than wait six months.’
Echoing this sentiment, Mark Crosby of Monash University has stated:
‘[The RBA] keeps delaying and finding reasons not to move up [interest rates].
‘My view is it’s safe enough to do so and the more you delay, the more imbalances build up.
‘With debt levels where they are, house prices where they are, and an economy as robust as it is, now is the time to raise rates.’
These comments don’t guarantee any actual adjustment to interest rates, but could put more pressure on the RBA to consider immediate action.
Euro to Australian Dollar Exchange Rate Forecast: Risk of EUR/AUD Decline on Falling Confidence Stats
The Euro (EUR) is in danger of falling further against the Australian Dollar (AUD) on Wednesday, when business and consumer confidence stats come out.
French confidence levels aren’t expected to change, but if Italy’s readings show a slowdown then the Euro could make greater losses against the Australian Dollar.