The Euro to Swiss Franc (EUR/CHF), Euro to New Zealand Dollar (EUR/NZD) and Euro to Australian Dollar (EUR/AUD) exchange rates all took a dive in the first part of Wednesday’s European session ahead of the European Central Bank monetary policy announcement which should give the details of the upcoming quantitative easing (QE) programme.
Strategist Christian Lenk commented: ‘Investors may be scaling back a little bit their positioning ahead of tomorrow’s ECB meeting.’
Earlier… The Euro to Swiss Franc (EUR/CHF) exchange rate was trending in a narrow range on Tuesday while the Euro to Australian Dollar (EUR/AUD) and Euro to New Zealand Dollar (EUR/NZD) exchange rates sank.
The Trans Tasman currencies have had a rollercoaster ride this week already, catalysed by several events. Firstly, China—both Australia and New Zealand’s largest trading partner—saw its central bank (the People’s Bank of China [PBOC]) announce it was making another cut to interest rates. Initially, both the ‘Aussie’ and the ‘Kiwi’ jumped as more stimuli in one of the world’s largest economies was expected to translate into higher demand for commodities from the Oceanic nations.
RBA Decisions Cause Choppy Australian Dollar (AUD) Exchange Rate Trading
However, the Australian and New Zealand Dollars shed most of their gains in Monday’s European session when speculation that the Reserve Bank of Australia (RBA) would be next in line for another rate cut heightened.
However, the RBA surprised forecasts by keeping interest rates stable at 2.25%
Wednesday is likely to be an extremely influential day for the Australian Dollar to Euro (AUD/EUR) exchange rate with the release of Australian Gross Domestic Product (GDP) figures. If Australian growth falls from 2.7% to 2.5% on the year in the fourth quarter as forecast, the ‘Aussie’ could soften.
Meanwhile, the Swiss Franc remained steady despite a rise in Swiss GDP. The fourth quarter registered 0.6% growth Q-o-Q while remaining at 1.9% year-on-year; economists had forecast an annual fall.
The State Secretariat for Economic Affairs commented: ‘Household consumption expenditure and that of non-profit organisations (NPOs) increased by 0.3% compared with the previous quarter. Virtually all subcategories contributed to the rise in consumption in the 4th quarter, with only the clothing category making a small negative contribution.’
However, with the Swiss National Bank (SNB) making the decision to eliminate the tie between the Euro and the Swiss Franc in January, investors are instead awaiting first quarter GDP figures before making judgements.
Friday could be another interesting day for the Swiss Franc when the Swiss Consumer Price Index (CPI) is published. On the year, February is expected to show a larger -0.6% contraction from January’s -0.5%.
The Euro has remained weaker against other major currency peers despite upbeat data, as ongoing negotiations between Greece and its creditors continue. If Greece cannot arrange a long-term agreement soon, Fitch has stated it will be downgrading the nation’s credit rating.
Euro Exchange Rate Forecast: EUR/AUD, EUR/NZD, EUR/CHF
The Euro can expect some volatility on Thursday when European Central Bank (ECB) President Mario Draghi holds a press conference in Cyprus following monetary policy announcements. The ECB is expected to begin quantitative easing this month, however; there appears to be a slight hitch as economists suggest there aren’t enough bonds to buy.
The Euro to Australian Dollar (EUR/AUD) exchange rate is trading at 1.4135. The Euro to New Zealand Dollar (EUR/NZD) exchange rate is residing at 1.4678. The Euro to Swiss Franc (EUR/CHF) exchange rate is trending in the region of 1.0679.