Euro to Australian Dollar Exchange Rate Tumbling as German Confidence Concerns Markets
Despite fresh speculation that the Reserve Bank of Australia (RBA) could further cut Australian interest rates, the Euro to Australian Dollar (EUR/AUD) exchange rate has been tumbling this week amid Euro (EUR) weakness.
A combination of rising Federal Reserve interest rate cut bets and Euro weakness prevented EUR/AUD from advancing last week, and the pair ultimately slipped from the level of 1.6083 to 1.6054.
EUR/AUD has been falling since markets opened this week. At the time of writing on Tuesday, EUR/AUD was trending close to a low of 1.5973 – which was the worst level for the pair since May.
As the US Dollar (USD) steadied from its tumble last week and the latest German data continued to disappoint investors, the Euro has been weaker since markets opened yesterday. This made it easier for even a mixed Australian Dollar (AUD) to advance.
Euro (EUR) Exchange Rates Slide as German Economic Fears Persist
Following a lack of particularly supportive Eurozone ecostats last week, this week’s Eurozone data has done little to offset European Central Bank (ECB) interest rate cut bets so far.
This morning saw the publication of the Eurozone’s latest economic sentiment index data from ZEW.
While the Eurozone’s overall figure was a slightly better than expected -20.3, it still worsened from the previous figure of -20.2.
On top of this, Germany’s figure saw an even deeper contraction in economic sentiment than forecast. The figure deepened from -21.1 to -24.5, rather than the expected -22.3.
German current conditions, expected to slow from 7.8 to 5, also unexpectedly contracted at -1.1.
As Germany is the Eurozone’s biggest economy, the continued uncertainty in Germany’s economic outlook is keeping pressure on the Euro and keeping European Central Bank easing speculation alight.
Australian Dollar (AUD) Exchange Rates Resilient despite Reserve Bank of Australia (RBA) Dovishness
Demand for the Australian Dollar has been supported largely by weakness in rival currencies recently, as speculation of further Reserve Bank of Australia (RBA) interest rate cut bets continue to keep a lid on the ‘Aussie’s potential for gains.
As Federal Reserve and Bank of England (BoE) interest rate cut bets rise, the Australian Dollar climbs versus the US Dollar and Pound respectively.
As a result, the Australian Dollar has been able to firm this week, even after the RBA’s latest meeting minutes were a little more dovish than the bank’s policy statement itself had been.
The RBA had indicated that it may not cut Australian interest rates again due to concerns over whether rate cuts were having enough of an effect.
However, the bank’s meeting minutes asserted that the bank was still fully prepared to cut interest rates again if necessary.
The Australian Dollar’s gains despite this RBA cautiousness have been partially due to stronger prices of Australian commodity trade, bolstering the nation’s trade stats even though global trade war fears persist.
Euro to Australian Dollar (EUR/AUD) Exchange Rate Could Fall Further if Eurozone Inflation Disappoints
There are more influential Eurozone and Australian ecostats due for publication over the coming sessions, which are likely to further influence Central Bank speculation.
Wednesday will see the publication of the week’s most influential Eurozone data, with Consumer Price Index (CPI) inflation rate data due.
If Eurozone inflation data beats expectations, ECB interest rate cut bets could lighten and EUR/AUD could rebound from its worst levels. Of course, weaker Eurozone data would have the opposite effect.
Westpac’s Australian leading index data will come in tomorrow as well, and key Australian job market data will follow on Thursday.
As Australia’s strong job market is one of the key factors limiting RBA interest rate cut bets, weaker Australian job data could make it easier for the Euro to Australian Dollar (EUR/AUD) exchange rate to recover.