Euro Australian Dollar (EUR/AUD) Exchange Rate Falls as ECB Leaves Rates on Hold
The Euro Australian Dollar (EUR/AUD) exchange rate slumped following the European Central Bank (ECB) meeting. The pairing is currently trading at around AU$1.6130.
The ECB left interest rates on hold during its January meeting. It is also expected to leave monetary policy on hold in the meantime.
In a statement, the bank said:
‘The Governing Council expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.’
Euro (EUR) Falls as ECB Launches Review
Meanwhile, the ECB noted it has launched a review that will redefine it’s mission and tools.
Speaking during a news conference, ECB President Christine Lagarde suggested the review would take around a year. However, it may take longer, and she added:
‘It is over when it is over.’
The bank’s chief declined to say what changes she would like to make to the ECB’s inflation target. Lagarde noted:
‘We will not leave any stone unturned and how we measure inflation is clearly something we need to look at.’
Australian Dollar Jumps as Unemployment Falls to Nine-Month Low
The Australian Dollar was able to make gains during today’s session after data revealed unemployment fell to a nine-month low.
— Bloomberg (@business) January 23, 2020
Unemployment in the country unexpectedly declined to 5.1% in December, which has prompted markets to price in a lower chance of an interest rate cut.
Investors are currently pricing in a 25% chance of a rate cut from the Reserve Bank of Australia (RBA) in February, down from 50% on Wednesday.
Commenting on the recent data, Bloomberg economist, James McIntyre said:
‘Continued labour market strength adds to the case for the RBA to potentially extend its pause when it meets in February. With earlier easing working its way through the economy, the solid jobs data – and lift in hours worked – affords the RBA some breathing room to assess the impact of drought, wildfires, and any upsides from the US-China trade deal. The forthcoming 4Q19 CPI data could make or break the case to deliver further easing in February, or remain on hold.’
Euro Australian Dollar Outlook: PMI Data in Focus
The Australian Dollar (AUD) could rise higher against the Euro (EUR) following the release of Australia’s flash PMI data.
If CommBank’s PMI composite rises higher than expected, and claws its way out of contraction territory, the ‘Aussie’ will push higher.
Meanwhile, the single currency could slump further following the release of Germany’s flash manufacturing PMI data.
If data shows the bloc’s largest economy continues to suffer from a manufacturing slowdown, the Euro Australian Dollar (EUR/AUD) exchange rate will slide.