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Euro Australian Dollar Exchange Rate Rises, RBA Slashes Interest Rates to Record-Low

EUR/AUD Exchange Rate Edges Higher as Risk-Off Market Mood Persists

The Euro Australian Dollar (EUR/AUD) exchange rate edged higher by 0.4% as the ‘Aussie’ continues to suffer from a market sell-off of risky assets amid the Covid-19 pandemic. The pairing is currently trading around AU$1.897.

Today also saw the Australian Dollar suffer after the Reserve Bank of Australia (RBA) cut its interest rates to a record-low of 0.25%. This left many Australian Dollar traders jittery on the rising possibility of a near-term economic recession for the Australian economy.

RBA Governor Philip Lowe said in his statement:

‘We are expecting a major hit to economic activity and incomes in Australia that will last for a number of months. We are also expecting significant job losses.’

‘The scale of these losses will depend on the ability of businesses to keep workers on during this difficult period.’

With markets seemingly locked in a risk-off mood due to uncertainties around Covid-19’s lasting effects on the global economy, appetite for risky assets like the Australian Dollar and New Zealand Dollar is under heavy pressure.

The ‘Aussie’ has shown a modest recovery from its 18-year lows, however, after the US Federal Reserve announced ‘Greenback’ swap lines to ease concerns over US Dollar shortage. Today’s RBA announcement of a quantitative easing program has also provided a modest uplift for AUD.

Euro (EUR) Rises as ECB Announce Emergency Stimulus Measures

The Euro (EUR) rose against the ‘Aussie’ after the European Central Bank (ECB) revealed its huge $820bn stimulus package to bolster the Eurozone’s economy throughout the coronavirus crisis.

The ECB’s so-called Pandemic Emergency Purchase Programme arrives six days after the Bank revealed various measures to calm the bloc’s increasingly sensitive economy.

Christine Lagarde, the President of the ECB, commented:

‘Extraordinary times require extraordinary action. There are no limits to our commitment to the euro. We are determined to use the full potential of our tools, within our mandate.’

However, with the EU’s decision to place the Euro-area under lockdown to prevent the spread of the coronavirus, the bloc’s economy could be on a fast-track to a recession.

This has left many Euro investors feeling cautious as fears continue to grow over the possibility that the ECB’s fiscal injections may not be enough to save the German economy.

EUR/AUD Outlook: Euro to Improve After the ECB Stimulus Package?

The Australian Dollar (AUD) will likely continue to suffer from risk-off market mood as investors continue to eye developments around the Covid-19 pandemic. Any signs of markets stabilising, however, would benefit the risk-sensitive ‘Aussie’.

Euro (EUR) traders will be monitoring how the ECB’s fiscal stimulus efforts translate when tackling the sensitive Eurozone’s economy. The EUR/AUD exchange rate could begin to edge higher if the bloc makes steady improvement in the coming days.