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Euro to Australian Dollar (EUR/AUD) Exchange Rate Softens after RBA Inflation Climbs Defying Forecasts, Are Rate Cuts off the Cards?

The Euro to Australian Dollar (EUR/AUD) exchange rate began Wednesday’s European session trending lower while the ‘Aussie’ climbed on account of strong inflation figures. The Reserve Bank of Australia’s Trimmed Mean Consumer Price Index rose from 2.2% to 2.3% in a surprise move and investors speculated that the central bank may be less inclined to cut rates with strong inflation.

The Euro to Australian Dollar (EUR/AUD) exchange rate was trending lower in Tuesday’s European session as the ‘Aussie’ commodity currency regained strength lost following Reserve Bank of Australia (RBA) statements in Australasian trading.

Australian Dollar to Euro (AUD/EUR) Exchange Rate Forecast

The RBA commented on the recent spikes in the Australian Dollar exchange rate just before the central bank has made policy announcements or released minutes and suggested that they may reduce foreign exchange market liquidity.

The RBA stated: ‘Members noted that the illiquid conditions that existed in the foreign exchange market at that time meant that small trades could move the price by relatively large amounts. The occurrence of these movements meant that liquidity was likely to decline further as more liquidity providers pulled back from the market during this window.’

Furthermore, the Australian Securities and Investments Commission are undertaking an investigation into the exchange rate movements as it’s possible that security around the meetings isn’t as tight as needed.

However, the RBA stated that the checks had not resulted in ‘any evidence of procedural lapses or conduct that could have led to the early release of relevant information.’

Furthermore, the RBA commented on the prospect of another interest rate cut, suggesting that it was possible more cuts could occur in order to quell Sydney’s ‘exuberant’ housing market.

Wednesday is likely to be a major day for Australian Dollar trading with the Australian Consumer Price Index released. Any fall in Australian inflation could see the ‘Aussie’ sink, while stability or perhaps a gain could offer the commodity currency some support.

Euro to Australian Dollar (EUR/AUD) Exchange Rate Forecast

Meanwhile, the Euro exchange rate has been trending lower against other majors as a result of the ongoing Greek negotiations, which are making extremely slow progress.

Tuesday has seen the European Central Bank (ECB) examine the Emergency Liquidity Assistance it’s been issuing to Greece in an attempt to push the nation into making an agreement after months of fruitless talks.

Economist Frederik Ducrozet suggests that there is ‘no doubt’ that the ECB is losing patience with Greece. Ducrozet commented: ‘Greek banks will need more funding before long, so in a way larger haircuts or a lower ELA cap are equivalent.’

Tuesday also saw the release of ZEW’s German and Eurozone indexes which were another mixed bag of results from the 19-nation currency bloc.

ZEW’s German Economic Sentiment Survey declined in April from 54.8 to 53.3, while the Eurozone Economic Sentiment Survey registered gains from 62.4 to 64.8. However, the German Current Situation Survey shot up in April, from 55.2 to 70.2.

The Australian Dollar to Euro (AUD/EUR) exchange rate is trading at 0.7242; the Euro to Australian Dollar (EUR/AUD) exchange rate is trending in the region of 1.3814.