The Euro to Australian Dollar (EUR/AUD) exchange rate softened by around -0.30% on Tuesday morning.
In response to generally positive domestic data, with particular reference to higher Eurozone Consumer Prices, the common currency advanced versus many of its closest currency peers. The appreciation was initiated by speculation that the Eurogroup will do everything it can to avoid risking losing Greece from the Eurozone after it called an emergency meeting to discuss proceedings.
The Australian Dollar, meanwhile, rallied across the board after the Reserve Bank of Australia (RBA) avoided cutting the benchmark interest rate. The ‘Aussie’ (AUD) appreciation was also aided by a softer US Dollar, which saw heightened demand for high-yielding assets.
The Euro to Australian Dollar (EUR/AUD) exchange rate is currently trending in the region of 1.4295.
Euro (EUR) Exchange Rate Forecast to Edge Lower against the Australian Dollar despite Positive Data
Although there seems to have been little by way of progress made during the emergency meeting of Eurogroup officials, the shared currency advanced significantly after the meeting was called. This is likely due to speculation that the Eurogroup are taking the threat of a Greek exit from the Eurozone very seriously, and making strides to alleviate the situation before time runs out for the Hellenic nation.
European economic data printed positively which aided the single currency appreciation. Of particular significance was consumer price data out of the Eurozone, which saw inflation move away from deflationary territory. On the year, May’s Eurozone Consumer Price Index came in at 0.3%; bettering the median market forecast 0.2%. The core measure also bettered the market consensus of 0.7%, with May’s actual result at 0.7%.
‘The threat of deflation has evaporated,’ said Marco Valli, chief Euro-area economist at UniCredit SpA in Milan. ‘Oil prices are adding upwards pressure on headline inflation and, while the underlying trend remains weak, it’s not consistent with deflation.’
The Euro to Australian Dollar (EUR/AUD) exchange rate dropped to a low of 1.4197 today.
Australian Dollar (AUD) Exchange Rate Forecast to Rally Across the Board on Soft US Dollar
After a spate of profit-taking caused the US Dollar to soften, the ‘Aussie’ rallied as traders sought higher-yielding assets. As the US Dollar continues to trend in a weakened position ahead of US data, the Australian Dollar is likely to hold gains.
Aiding the Oceanic currency’s uptrend was the RBA managing to avoid cutting the benchmark interest rate despite ‘Aussie’ overvaluation. They have kept the door open for further easing, however, should the high-value South Pacific asset continue to weigh on economic recovery.
The statement from Governor Glenn Stevens concluded that; ‘Having eased monetary policy last month, the Board today judged that leaving the cash rate unchanged was appropriate at this meeting. Information on economic and financial conditions to be received over the period ahead will inform the Board’s assessment of the outlook and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target.’
Euro to Australian Dollar (EUR/AUD) Exchange Rate Forecast to Fluctuate on US Dollar Movement
With US data still due for publication, there is still a high chance of EUR/AUD volatility. A fresh rise for the US asset will weigh on demand for the Australian Dollar. With that being said, there is a complete absence of further domestic data publications pertaining to either nation to provoke changes.
Wednesday will be significant for the EUR/AUD pairing with the European Central Bank (ECB) interest rate decision and Australian growth data due for release.
The Euro to Australian Dollar (EUR/AUD) exchange rate advanced to a high of 1.4348.