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Euro Australian Dollar (EUR/AUD) Exchange Rate Surges as Market Risk Appetite Diminishes

EUR exchange rate forecast

Euro Trade Surplus Shrinks – EUR/AUD Exchange Rate Unperturbed

The Euro to Australian Dollar (EUR/AUD) exchange rate surged on Monday, unperturbed by some soft ecostats from the bloc and capitalising on diminishing risk appetite amongst the markets.

According to Eurostat, the bloc’s balance of trade readings for January dropped from 22.3b to 19.9b – far below the market expectation of 23.2b.

This was a three-month low for the bloc’s trade surplus, with exports declining by -0.7% and imports growing by 1.1%.

Beyond this, the Eurozone’s construction output was rather mixed, pulling back by 2.2% in January month-on-month but rising by 3.6% on a yearly basis.

A decline is not entirely unusual for the first month of the year, but combined with the recent fall in German exports it was enough to raise some eyebrows – particularly with the sharp decrease in France’s own construction output.

Nonetheless, the single currency remained resolute against the currently plummeting ‘Aussie’ Dollar, supported by market fears of a global trade war and the effect it could have on more vulnerable commodity-based currencies.

US Prepares to Levy Extensive Tariffs against China – Australian Dollar (AUD) Exchange Rates Tumble

Last week saw the appointment of Larry Kudlow as US President Donald Trump’s new Economic Advisor, an event that shook the markets with Kudlow (traditionally against trade intervention) shifting his stance to call for a ‘coalition of the willing’ in a hard-line response against China’s trade practices.

Beyond this, the US is reportedly preparing an extensive range of tariffs against China this week, with reports suggesting that President Trump wants to target over $60bn in Chinese products in order to reduce the US trade deficit with China.

Whilst Australia is exempt from President Trump’s recent tariffs on steel and aluminium, markets are concerned that these measures against China will result in a tit-for-tat response that could escalate to a global scale, potentially hurting Chinese industry and limiting their demand for Australian commodities such as iron ore and copper.

This outlook continued to limit the Australian Dollar on Monday, with a lack of notable ecostats leaving the US trade tariff plans centre stage.

Euro Australian Dollar (EUR/AUD) Exchange Rate Forecast: RBA Minutes and ‘Aussie’ Employment in the Spotlight

The EUR/AUD exchange rate could see greater movement as the week progresses depending on the outcome of tomorrow’s Reserve Bank of Australia (RBA) meeting minutes and the accompanying speech from RBA Michelle Bullock.

Markets are not expecting massive revelations in the minutes – with the bank forecast to remain cautiously optimistic for the most part – but Bullock’s tone could knock the ‘Aussie’ Dollar up or down depending on her sentiment.

Beyond this, the market focus will soon shift to Wednesday’s Australian employment readings in an attempt to better gauge the strength of the Australian economy.

If unemployment drops, then the ‘Aussie’ Dollar could find some support, but these readings could play second-fiddle to any revelations regarding President Trump’s tariffs.