The Euro to Australian Dollar (EUR/AUD) exchange rate softened by around -0.25% on Wednesday morning.
With European Central Bank (ECB) policymakers set to make their interest rate decision later on Wednesday, the single currency softened versus the majority of its major peers. The declination is the result of ongoing geopolitical tensions in Greece and not due to expectations for a dramatic policy shift from the ECB.
The Australian Dollar, meanwhile, softened versus many of its major peers after data out of China printed poorly. Additional declination can be attributed to the International Monetary Fund (IMF) warning that the Reserve Bank of Australia (RBA) will cut rates in May. The depreciation was slowed a little, however, thanks to rising oil prices.
The Euro to Australian Dollar (EUR/AUD) exchange rate is currently trending in the region of 1.3946.
Euro (EUR) Exchange Rate Softens ahead of ECB Rate Decision
With the April 24th deadline looming, Athens officials are scrambling to produce reforms that Eurogroup officials will accept. Given that they have failed on many previous attempts, speculation is rife that the Greek government will be unable to find the balance between pleasing its people and its creditors.
Should the cash-strapped nation fail to acquire the much needed bailout funds, there is a high possibility that they will be forcibly declassified as a member of the Eurozone. Additionally, without relief funds they will almost certainly default on loan repayments.
The ECB rate decision is unlikely to show any significant changes. However, some believe there is a slight possibility that President Mario Draghi will see fit to reduce the time period of quantitative easing considering it has already had a positive effect on banks’ willingness to lend.
The Euro to Australian Dollar (EUR/AUD) exchange rate dropped to a low of 1.3917 today.
Australian Dollar (AUD) Exchange Rate Softens on China Data
Data pertaining to the world’s second largest economy produced mostly disappointing results on Wednesday, causing the ‘Aussie’ (AUD) to soften versus many of its most-traded currency rivals. Of particular disappointment was China’s Industrial Production which showed growth of 5.6% in March on the year, missing the median market forecast of 7.0% output considerably.
‘I am surprised at how weak the March industrial production is,’ said Wang Tao, chief China economist at UBS Group AG in Hong Kong. ‘The impact of monetary policy is limited but they do need to cut rates.’
The ‘Aussie’ also softened in response to a warning from the IMF that they expect the RBA to cut rates in May. ‘In economies in which output gaps are currently negative [Australia, Japan, Korean, Thailand], policymakers may need to act to prevent a persistent decline in inflation expectations,’ the IMF has warned.
Euro to Australian Dollar (EUR/AUD) Exchange Rate Forecast to Fluctuate
Given that the ECB rate decision is yet to come, and with commodities changes driving ‘Aussie’ movement, the Euro to Australian Dollar (EUR/AUD) exchange rate has the potential to fluctuate over the course of the European session.
Thursday will be significant for those invested in the Australian Dollar with several important labour market data publications due for release.
The Euro to Australian Dollar (EUR/AUD) exchange rate climbed to a high of 1.4017 today.