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Euro to Australian Dollar Exchange Rate Forecast: Could German Inflation Data Boost EUR/AUD?

Euro to Australian Dollar Exchange Rate Fails to Hold as French Inflation Has Little Impact

Despite some slightly better-than-expected inflation data from France on Thursday, the Euro to Australian Dollar (EUR/AUD) exchange rate only saw modest movement and remained weak.

After slipping slightly from 1.6044 to 1.6011 last week, EUR/AUD could be in for bigger losses if market risk-sentiment improves.

On Tuesday, EUR/AUD touched on a multi-week-low of 1.5894, but the pair trended closer to 1.5943 at the time of writing.

Thursday saw the publication of France’s final March Consumer Price Index (CPI) results, which largely met expectations but did see a slightly stronger than forecast yearly figure.

Month-on-month inflation rose from 0% to 1% as expected, while the yearly figure beat 1.5% projections and climbed from 1.2% to 1.6%.

However, while French inflation was optimistic, Euro (EUR) investors are still awaiting German inflation data due on Friday. This has made it easier for the Australian Dollar (AUD) to benefit from recent commodity news.

Commodity Correlated Australian Dollar (AUD) Supported by Trade News

While geopolitical concerns and tensions have weighed on market risk-sentiment, some risky trade and commodity-correlated currencies like the Australian Dollar (AUD) saw stronger demand thanks to rising oil prices.

Prices of oil have surged due to tensions in the Middle-East, which has made commodity-correlated currencies more appealing too.

Still, the Australian Dollar was trending slightly lower than earlier in the week, partially due to geopolitical concerns, as well as some underwhelming Australian ecostats this week.

NAB’s Australian business confidence survey for March unexpectedly fell from 9 to 7 on Tuesday, and Westpac’s April consumer confidence survey fell on Wednesday too – from 103 to 102.4.

Thursday’s Australian consumer inflation expectations slipped from 3.7% to 3.6%. While home loans did beat the forecast -0.3% in February, they still only came in with a contraction of -0.2%.

Euro (EUR) Exchange Rate Strength Limited by European Central Bank (ECB) Caution

Earlier in the week, European Central Bank (ECB) speculation drive Euro movement again.

ECB official Ewald Nowotny stated he thought the bank should hike the Eurozone deposit rate during the quantitative easing (QE) wind down, in preparation for a potential interest rate hike next year.

However, the ECB later distanced itself from Nowotny’s comments, saying they did not represent the bank’s view and were simply his personal outlook. This saw the Euro shed some of its early-week gains.

Other Eurozone data published this week has been mixed. Italian industrial production was highly disappointing on Tuesday, but Italian retail sales were slightly better than expected on Wednesday.

Euro to Australian Dollar (EUR/AUD) Forecast: German Inflation in Focus

Friday will see the publication of this week’s most influential Eurozone data for the week, which could cause some late-week Euro to Australian Dollar (EUR/AUD) exchange rate movement.

Germany’s final March Consumer Price Index (CPI) results will be published. German inflation is forecast to have slowed slightly from 0.5% to 0.4% month-on-month but have risen slightly from 1.4% to 1.6% year-on-year.

Spanish inflation stats and Eurozone trade balance results could also influence the Euro slightly on Friday if they surprise.

However, if investors continue to find commodity-correlated currencies appealing, the Australian Dollar may remain resilient.

The Australian Dollar is likely to be supported by stronger oil prices, as well as any cooling in geopolitical tensions.

The Euro to Australian Dollar (EUR/AUD) exchange rate is currently on track to end the week lower.