The Euro to Australian Dollar (EUR/AUD) exchange rate was trending within a limited range on Wednesday morning.
As traders await Eurozone Retail Sales data, due for publication later on Wednesday morning, the shared currency edged higher versus most of its major peers. The appreciation can be linked with Tuesday’s positive European Commission report in addition to the crisis in Greece having been priced-in already.
The ‘Aussie’ (AUD), meanwhile, continues to strengthen versus the majority of its most traded currency competitors, even after producing mixed data results. The appreciation, which was initiated by speculation that the Reserve Bank of Australia (RBA) will move away from an easing bias, has the potential to be detrimental given that the central bank want a devalued currency to support economic growth.
The Euro to Australian Dollar (EUR/AUD) exchange rate is currently trending in the region of 1.4099.
The Euro to Australian Dollar (EUR/AUD) exchange rate dived by over -1% on Tuesday morning.
With Greece failing to secure bailout funds over a long weekend of talks – despite many agreeing that progress has been made – the single currency softened versus the majority of its most traded currency rivals. The depreciation was aided by poor manufacturing output from Greece and France.
The Australian Dollar, meanwhile, advanced versus the majority of its most traded currency competitors on Tuesday morning. Although the Reserve Bank of Australia (RBA) cut the benchmark interest rate to a record-low 2.0%, the ‘Aussie’ (AUD) advanced. This can be attributed to speculation that the RBA will not cut rates further. The appreciation came even after domestic data failed to impress.
The Euro to Australian Dollar (EUR/AUD) exchange rate is currently trending in the region of 1.4070.
Euro (EUR) Exchange Rate Declines ahead of European Commission Forecasts
As the relationship between Greece and Eurozone officials continues to fray, and with expectations that the cash-strapped nation will not secure bailout funds in time to meet with debt repayment obligations, the shared currency slumped versus most of its major peers. ‘Talks are not progressing as fast as they should,’ one Paris official said.
‘Greece must go faster now,’ said Michel Sapin, the French finance minister, echoing the frustration voiced by the other European finance ministers at the gathering. ‘We’re wasting time, and time is precious.’
The European Commission Economic Forecasts are to be published later on Tuesday. Expectation is rife that Greece’s economic forecasts will be slashed considerably, further dampening investor confidence. ‘Greek economic conditions are deteriorating quite fast,’ said Frederik Ducrozet, an economist at Credit Agricole CIB in Paris. ‘It’s negative in terms of the fiscal revenues and the backdrop for the negotiations. But it also provides Greece with some bargaining power when they negotiate the primary surplus for this year and next.’
The Euro to Australian Dollar (EUR/AUD) exchange rate dropped to a low of 1.4053 today.
Australian Dollar (AUD) Exchange Rate Strengthens despite Poor Domestic Data
Australia’s economic data printed disappointingly on Tuesday, but the results had minimal impact. The AiG Performance of Service Index declined from 50.2 to 49.7 in April, falling through the 50 barrier which separates growth from contraction. The ANZ Roy Morgan Weekly Consumer Confidence Index dropped from 111.8 to 108.7 in the week ending May 3rd. Additionally, the Trade Deficit narrowed slightly from -1609 million to -1322 million, but failed to meet with the median market forecast of a rise to -1000 million.
The RBA cut the cash rate to a record-low 2.0% on Tuesday, which would have ordinarily caused a significant ‘Aussie’ declination. However, the Oceanic currency advanced as traders speculate that the central bank will not cut rates further with pressures from the housing bubble weighing on stimulus.
‘The Australian Dollar is definitely trading as though investors think the RBA has drawn the line at 2 percent,’ said Sean Callow, a strategist at Westpac Banking Corp. ‘The statement reinforces that outlook, with the more upbeat commentary on household demand and employment.’
‘We think the easing cycle ends today,’ said Stephen Walters, Sydney-based chief economist at JPMorgan Chase & Co. ‘On our rate forecasts, the bank’s next rate move likely will be a hike, but not until the second half of 2016, which seems a very long way off.’
Euro to Australian Dollar (EUR/AUD) Exchange Rate Forecast to Hold Gains
Given the extent of the advance, and with geopolitics weighing heavily on the shared currency, the Euro to Australian Dollar (EUR/AUD) exchange rate is likely to hold gains over the remainder of Tuesday’s European session.
With several influential economic data publications pertaining to both Europe and Australia due on Wednesday, the EUR/AUD exchange rate is likely to fluctuate. Data out of China may also impact on ‘Aussie’ movement.
The Euro to Australian Dollar (EUR/AUD) exchange rate climbed to a high of 1.4052 today.