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Euro to Australian Dollar (EUR/AUD) Exchange Rate Forecast to Strengthen on Oil Slump

The Euro to Australian Dollar (EUR/AUD) exchange rate strengthened by around 0.83% on Monday morning.

After a slump in oil prices caused market sentiment to dampen, the commodity-correlated Australian Dollar softened versus the majority of its most traded peers. However, a surge in demand for gold amid cautious trading has slowed the ‘Aussie’ (AUD) decline.

The common currency, meanwhile, is recovering some of its losses after a significant declination following victory for Syriza in Greece. However, the losses were parted on Monday amid concern that the downtrend was overdone. Given that Syriza are part of coalition, having not secured a landslide victory, traders speculate that the anti-austerity party they have enough power to force a Grexit.

The Euro to Australian Dollar (EUR/AUD) exchange rate is currently trending in the region of 1.4226.


At the close of last week, the Euro to Australian Dollar (EUR/AUD) exchange rate was trending within a tight range.

The well documented move by the European Central Bank (ECB) to inject €60 billion per month into the Eurozone caused significantly dampened market sentiment. As a risk-correlated currency, the Australian Dollar softened from cooling demand. Speculation that the Reserve Bank of Australia (RBA) will join in with the spate of central bank easing amplified the ‘Aussie’ (AUD) declination.

Euro (EUR) Exchange Rate Forecast to Tick Lower on ECB Hangover

Although the shared currency suffered a significant declination last week, there is a high likelihood of further losses with mounting negative sentiment. The forthcoming Greek elections are likely to weigh heavily on the common currency.

Given the fact that cautious trade is dominating the currency market, domestic data is likely to be less impactful. However, there are several European publications which will be of interest to those invested in the Euro.

‘Once again, Draghi delivers’ said Christian Schulz of Berenberg Bank. ‘Expectations have risen considerably in recent days, but the ECB still managed to beat most’. However Jonathan Loynes of Capital Economics sounded a note of caution. ‘Even sizeable amounts of QE are unlikely to transform the outlook for the Eurozone economy and eliminate the risk of a prolonged and damaging bout of deflation’ he warned.

The most significant of these will be; German Unemployment Rate, German Unemployment Change, the German Consumer Price Index, the German EU-Harmonised CPI, Eurozone Unemployment Rate, Eurozone CPI Estimate and Eurozone CPI Core.

Australian Dollar (AUD) Exchange Rate Forecast to Soften on Risk Aversion

With risk-aversion strategies dominating trade, the high-yielding risk-correlated ‘Aussie’ is likely to decline over the coming week. This is especially true if speculation continues to grow that the RBA will emulate the ECB and the Bank of Canada (BOC) by easing policy amid fears of deflation and overvaluation.

Of most significance will be the Consumer Price Index. Given that many countries have recorded sliding inflation amid falling oil prices, most analysts expect Australian consumer prices to follow suit. Should this be the case, speculation will mount that the RBA will be another central bank prepared to loosen monetary policy to combat deflationary pressure.

At the close of last week, oil rallied from news that Saudi Arabia’s King died. Speculation that the new King will alter oil policy caused prices to rise. However, most experts believe the increase to be temporary with an ever growing supply.

The Australian Dollar could find support from rising gold prices, especially given the heightened demand for safe-haven assets amid cautious trading.