The Euro to Australian Dollar (EUR/AUD) exchange rate is forecast to slip to its lowest-level in a week on Tuesday as the ‘Aussie’ surged higher after the Reserve Bank of Australia chose to leave interest rates unchanged in April.
The Euro to Australian Dollar (EUR/AUD) exchange rate weakened to a session low of 1.4118
Australian central bank policy makers held interest rates unchanged at 2.25% for a second consecutive month on Tuesday. Interest rates in the land down under are at their lowest level since the 1960s as the RBA tries to counter the effects of tumbling iron ore prices and slowing domestic economy.
The decision sent the ‘Aussie’ surging against the majority of its most traded peers.
Despite the RBA leaving rates unchanged this time, investors now expect the bank to make a cut at its next policy meeting on May 4.
‘At today’s meeting the Board judged that it was appropriate to hold interest rates steady for the time being. Further easing of policy may be appropriate over the period ahead, in order to foster sustainable growth in demand and inflation consistent with the target. The board will continue to assess the case for such action at forthcoming meetings,’ said RBA governor Glenn Stevens.
Also supporting the Australian Dollar was data released by the Australian Bureau of Statistics. The data showed that retail sales in the nation increased by 0.7% in February, a number that beat forecasts for a gain of 0.4%. The preceding months figure was also revised higher to 0.5% from 0.4%.
Eurozone Data Not Enough to Support Euro Exchange Rate
The Euro was unable to regain any lost ground against the ‘Aussie’ despite the release of data which showed that the Eurozone economy expanded by its fastest pace in 11 months.
According to a number of PMI reports, the Eurozone economy is beginning to move away from a period of stagnation. The falling value of the Euro thanks to the European Central Bank’s quantitative easing programme and lower petrol prices is firming confidence across the region.
According to Markit, its composite PMI, which combines activity seen in the Eurozone’s manufacturing and services sectors rose to 54.0 in March, from 53.3 in February. The figure was below expectations for a reading of 54.1.
A separate report released by Eurostat showed that producer price inflation across the Euro area increased for the first time in five months in February. The report eased some of the concerns over deflation.
On a month-on-month basis, PPI rose to 0.5% to beat forecasts for a figure of -0.1%.
Euro traders will now turn their attention to Wednesday’s Eurozone retail sales and German factory orders data.