The Euro to Australian Dollar (EUR/AUD) exchange rate dived by around -0.75% on Wednesday afternoon.
After it transpired that the European Central Bank (ECB) is struggling to source bonds to fund the massive programme of quantitative easing it outlined in January, the shared currency softened versus many of its major peers. Further losses can be attributed to ongoing concern that the German government will not accept Greece’s programme of debt repayment.
The Australian Dollar, meanwhile, strengthened versus most of its major rivals after China’s Manufacturing PMI bettered the median market forecast figure. Rising gold prices and improving trader risk-appetite also aided the ‘Aussie’ surge.
The Euro to Australian Dollar (EUR/AUD) exchange rate is currently trending in the region of 1.4372.
Euro (EUR) Exchange Rate Softens on ECB Miscalculation
ECB President Mario Draghi has made a critical blunder, which is likely to result in the shared currency sustaining losses. After having promised a massive injection of liquidity into the Eurozone, it now transpires that there is a lack of bonds to finance the operation. ‘It will be challenging for the ECB to source enough government bonds to meet its QE targets,’ Morgan Stanley co-head of European rates strategy, Anthony O’Brien said.
‘There is already a huge shortage of German bonds in the market,’ said Philipp de Cassan, head of Euro core rates trading at Nomura. ‘We’re already seeing the symptoms of an ECB buying program.’
Additional Euro declination can be attributed to ongoing anxieties that the German government will not accept Greece’s debt repayment programme. This notion was bolstered after the International Monetary Fund voiced concerns regarding Greece’s proposal.
The Euro to Australian Dollar (EUR/AUD) exchange rate dropped to a low of 1.4353 today.
Australian Dollar (AUD) Exchange Rate Advances on China’s Manufacturing Data
After China’s Manufacturing PMI moved into growth territory after having contracted in the past few readings, the Australian Dollar strengthened versus most of its major peers. China’s Manufacturing PMI was forecast to drop from 49.7 to 49.5, but the actual result reached 50.1.
Australian data also printed reasonably positively, which allowed the South Pacific asset to climb versus many of its most traded currency competitors. Skilled Vacancies and Construction Work Done improved upon forecast figures, and the Wage Cost Index equalled the market consensus.
A general improvement in the commodities market, thanks to increasing risk-appetite, has also had a positive effect on ‘Aussie’ movement.
Euro to Australian Dollar (EUR/AUD) Exchange Rate Forecast to Hold Losses
Given the lack of data to curb the trend, the Euro to Australian Dollar (EUR/AUD) exchange rate is likely to hold losses for the remainder of Wednesday. Thursday is likely to see EUR/AUD volatility with significant German labour market data due for publication. However, gains are very unlikely with the ECB’s bond buying issues in focus.
The Euro to Australian Dollar (EUR/AUD) exchange rate reached a high today of 1.4482.