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Euro to Australian Dollar (EUR/AUD) Exchange Rate Forecast to Trend within Narrow Range as Surging US Dollar Dampens High-Yield Demand

The Euro to Australian Dollar (EUR/AUD) exchange rate was trending within a limited range on Monday afternoon.

Despite the fact that Euro-area economic data printed mostly positively on Monday, the shared currency slumped versus many of its competitors. The depreciation can be linked to ongoing tension in Greece as the Greek Prime Minister shows increasing reluctance to bow down to those demands from creditors which he feels compromise electoral red-lines.

The Australian Dollar, meanwhile, edged higher versus many of its most traded currency rivals in response to positive domestic data – principally better-than-expected manufacturing growth. The gains were short-lived, however, after positive US Data saw the Dollar surge and stymied demand for high-yielding assets.

The Euro to Australian Dollar (EUR/AUD) exchange rate is currently trending in the region of 1.4318.

Euro (EUR) Exchange Rate Forecast to Trend within Close Range to Australian Dollar on Geopolitics

Although Eurozone Manufacturing registered a more modest pace of growth than forecast, French and Italian manufacturing bettered estimates. Additionally, German Consumer Prices and Core Consumer Prices met with their respective median market forecast figures. However, the reasonably positive data results weren’t enough to provoke a shared currency uptrend as the situation in Greece dominates trader focus. With several International Monetary Fund (IMF) payments due this week, investors will be paying very close attention to developments in the Hellenic nation.

‘The lack of an agreement so far is not due to the supposed intransigent, uncompromising and incomprehensible Greek stance,’ Prime Minister Alexis Tsipras said in the article published on Sunday. ‘It is due to the insistence of certain institutional actors on submitting absurd proposals and displaying a total indifference to the recent democratic choice of the Greek people.’

‘It’s becoming increasingly unlikely that (Greece) will be able to get the funding without some kind of political disruption along the way,’ said Hamish Pepper, a currency strategist at Barclays bank in London. ‘The impact on the currency is also consistent with that view.’

The Euro to Australian Dollar (EUR/AUD) exchange rate dropped to a low of 1.4233 today.

Australian Dollar (AUD) Exchange Rate Forecast to Trend within Limited Range against Euro on Bullish US Dollar

In the first half of Monday’s European session, the ‘Aussie’ (AUD) rallied versus many of its closest rivals after domestic data printed positively. The AiG Performance of Manufacturing increased from 48 to 52.3 in May, moving away from contraction and into growth territory. Although China’s manufacturing data missed estimates, the fact that it remained in growth territory also bolstered demand for the high-yielding asset. Predictions that China’s manufacturing would slump and prompt central bank intervention slowed the ‘Aussie’ advance somewhat, however.

Annabel Fiddes, Economist at Markit, stated; ‘The headline PMI signalled a further deterioration in the health of China’s manufacturing sector in May. A solid fall in new export work contributed to fewer new orders, which in turn led to the first contraction of output in 2015 so far. Furthermore, sustained job cuts, ongoing destocking activities and reduced purchasing activity all suggest that the sector may remain in contractionary territory as we head into mid-year. The latest survey data therefore suggest that more stimulus measures may be required to help boost domestic demand and recover some growth momentum.’

The appreciation was short-lived after the latter half of Monday’s European session saw the US Dollar rally. The depreciation has been relatively steady, however, as the bullish US Dollar has caused gold prices to strengthen.

Euro to Australian Dollar (EUR/AUD) Exchange Rate Forecast to Hold Steady on Lack of Data

Given the absence of further domestic data publications to provoke volatility, the Euro to Australian Dollar (EUR/AUD) exchange rate is likely to hold steady for the remainder of Monday’s European session. Tuesday will see significant EUR/AUD volatility with data publications pertaining to both Australia and Europe due for release. Of most significance will be German Unemployment Change and Unemployment Rate, and the Eurozone Consumer Price Index.

The Euro to Australian Dollar (EUR/AUD) exchange rate advanced to a high of 1.4352 today.