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Euro Australian Dollar (EUR/AUD) Exchange Rate Forecast: Will Draghi Talk Down the Euro?

EUR/AUD Exchange Rate Set for Losses as ECB Looks to Tackle the Strength of the Euro

The Euro Australian Dollar (EUR/AUD) exchange rate is in a holding pattern today as markets await the European Central Bank (ECB) latest rate decision on Thursday.

At the time of writing the EUR/AUD exchange rate remains virtually unchanged from today’s opening levels.

Euro (EUR) Exchange Rate Steady Ahead of ECB Rate Decision

The Euro (EUR) is holding steady this morning and is likely to remain largely on hold throughout the day’s session as investors await the conclusion of the ECB’s latest policy meeting tomorrow afternoon.

After cutting its easing bias in its previous meeting, economists are not expecting the ECB to make any alterations to its policy outlook this month.

However many suspect that the bank is likely to strike a slightly more cautious tone this time round, particularly regarding the strength of the Euro, which has become a growing headache for the ECB at it attempts to bolster inflation.

In fact some analyst predict that ECB President, Mario Draghi may use his statement tomorrow to attempt to talks down the Euro, in an attempt to prevent the EUR exchange rate soaring again as it did last year.

Greg Gibbs, former head of Asia Pacific Market Strategy at the Royal Bank of Scotland said;

‘The ECB said it has been monitoring strength in the Euro since January.

The evidence suggests that indeed EUR strength has contributed to weaker growth and is a problem for the ECB.

The Euro has fallen after the last four ECB meetings, as Draghi emphasised patience and warned of risks. The same appears likely this week.’

Thin-Trading Volumes leaves Australian Dollar Exchange Rate (AUD) Adrift

Meanwhile the Australian Dollar (AUD) is struggling to find any momentum this morning as the closure of domestic markets for Anzac day has led to thin trading volumes for the ‘Aussie’.

This has left the Australian Dollar largely adrift, with the currency continuing to face pressure from the strength of the US Dollar (USD).

The recent rise of USD continues to exert pressure on commodity and emerging currencies this morning, with investors flocking to the US Dollar as US treasury yields broke past 3%.

At the same time renewed weakness in Chinese iron ore futures is also dragging on the Australian Dollar exchange rate this morning as the commodity fell 1.6 on the Dalian Commodity Exchange.

However with Chinese steel prices threating to strike a seven-week high, analysts suggest that this dip in iron ore is likely to be short-lived, with the ‘Aussie’ potentially finding some support if iron ore demand follows steel prices higher.

EUR/AUD Exchange Rate Forecast: Will German Employment Figures help to Offset Possible ECB losses?

Looking ahead the movement in the EUR/AUD exchange rate is unsurprisingly set to be dominated by the ECB’s rate decision tomorrow.

However looking past that the Euro could find some strength with the release of Germany’s latest employment figures at the end of the week, with another strong labour report from Europe’s largest economy likely to reflect well on EUR.

Meanwhile the Australian Dollar may be spurred in to movement later tonight should Australia’s first quarter export price figures print in line with expectations.