The Euro to Australian Dollar (EUR/AUD) exchange rate is expected to experience volatility next week as investors are expected to be jittery ahead of interest rate decision announcements by the Reserve Bank of Australia and European Central Bank (ECB).
At the start of the week the Australian currency is forecast to fall as New Home Sales in the Land Down Under are expected to come in weakly. The December figure showed that month on month sales declined by -1.9% and February’s figures are likewise expected to disappoint.
The Euro meanwhile is expected to experience volatility due to the publication of Eurozone inflation, unemployment and Manufacturing PMI data. Overnight in the Asian session, the ‘Aussie’ will be impacted by the latest AIG Manufacturing Index.
On Tuesday, the ‘Aussie’ will experience sharp volatility as investors focus upon the RBA Interest Rate Decision. Speculation has been rife as to whether a further rate cut will occur after the RBA surprised the markets last month by cutting rates.
If a rate cut does occur then we expect the Australian currency to tumble against all of its most traded peers. Further weakness for the currency could occur if ISM Manufacturing PMI data out of the USA comes in strongly and bolsters the US Dollar exchange rate.
More volatility is forecast midweek for the ‘Aussie’ due to the release of fourth quarter Gross Domestic Product (GDP) data. On a quarterly basis, GDP is expected to have risen by 0.4%. On an annual basis, GDP is expected to improve from the preceding figure of 2.7% to 3%.
A weaker than forecast figure will put more pressure on the Australian Dollar exchange rate. The Euro meanwhile is likely to find support from expected improvements in PMI reports.
Thursday sees the release of Australian Balance of Trade and Retail Sales data. The single currency is expected to experience volatility as the ECB announces its latest interest rate decision. The bank is expected to leave interest rates at 0.05%. The ECB is also expected to announce the start of its €1.1 trillion quantitative easing programme.
On Friday the Euro will likely tick higher because of the publication of Eurozone GDP second quarter estimate data. The economy is forecast to have expanded by 0.3% on a quarterly basis and by 0.95 on an annual basis.
Also due for release on Friday, will be the latest Australian AIG Construction Index.
The Aussie will also move because of US economic data releases.
US Nonfarm Payrolls and unemployment data will have a particular impact on the movements of the ‘Aussie’.
On Monday morning the Euro to Australian Dollar (EUR/AUD) exchange rate was trading in the region of 1.4375