Fears about Eurozone Damage from Turkish Economic Crash Leave EUR/AUD Exchange Rate Tight
The Euro (EUR) has traded in a narrow range against the Australian Dollar (AUD) today, hitting a level of AU$1.5673.
This relatively disappointing performance has been caused by ongoing concerns that a Turkish economic crash could harm Eurozone banks.
These fears originated from last week’s news that the European Central Bank (ECB) was concerned about Eurozone bank exposure to Turkish unrest.
Another worry is that Turkey’s present economic troubles could prove contagious, leading to similar difficulties in other currency markets.
Spain and Greece are seen as the most ‘at risk’ countries to Turkish financial woes, given their respective focuses on banking and trading with Turkey.
The Euro’s movement against the Australian Dollar has been limited so far because of emergency action taken by the Turkish central bank to remedy the situation.
Australian Dollar to Euro (AUD/EUR) Exchange Rate Steady after Consumer Confidence Drops
The Australian Dollar (AUD) has made a minimal advance against the Euro (EUR) today, following reports that Australian consumer confidence is falling.
Westpac’s consumer confidence index for August has declined from 106.1 points to 103.6; this was just above the forecast reading of 103 points.
On the plus side of this news, any reading above 100 points indicates that there are more optimistic respondents to Westpac’s survey than pessimistic ones.
Stressing this fact, Westpac Chief Economist Bill Evans said:
‘Despite the latest decline, the Index is still in positive territory overall, 5.5% above the average in 2014 to 2017.
‘August marks the ninth successive month that the Index has been above the 100 level … a clear turnaround on the twelve months in which 11 out of 12 readings were below 100.’
Mr Evans concluded his statement with a cautious forecast on future Reserve Bank of Australia (RBA) activity, which ultimately limited Australian Dollar demand:
‘The RBA still expects inflation to lift to 2.25% by 2020 and anticipates that the next move in the [interest rate] will be up.
‘An obvious headwind to the Bank’s plan to move inflation back into the target zone is the impact that five years of underperformance in inflation will have on households’ and firms’ expectations.
‘Lower expectations will make it that much more difficult to lift inflation back into the band.
‘Certainly it will be quite some time before the RBA has a case to adjust the [interest] rate. Westpac reaffirms its view that [interest] rates will remain on hold in both 2018 and 2019.’
Are Euro to Australian Dollar (EUR/AUD) Exchange Rate Gains ahead on Higher Australian Unemployment?
While the Euro (EUR) has traded tightly against the Australian Dollar (AUD) today, the EUR/AUD exchange rate has a chance to advance on Thursday morning.
This is when Australian labour market data will be released – some economists are forecasting an unemployment rate rise from 5.4% to 5.5%.
Such a result could push the EUR/AUD exchange rate higher, as it might reduce demand for the Australian Dollar.
Among other issues, rising unemployment might lower the odds of a near-term RBA interest rate hike, something considered long-overdue by AUD traders.