The Euro to Australian Dollar (EUR/AUD) exchange rate jumped close to its best level in a month on Tuesday after the Reserve Bank of Australia slashed interest rates and entered the intensifying global currency wars.
The Euro to Australian Dollar Exchange Rate Hit a Session High of 1.485
The RBA is just the latest central bank to cut interest rates and the move comes hot on the heels of similar actions taken by the Bank of Canada and sets it onto the same path as the Bank of Japan and European Central Bank.
Against the US Dollar the ‘Aussie’ slumped to its lowest level in nearly six years and fell to a five-and-a-half year low against the Pound after the RBA surprised the market by cutting interest rates by 25 basis points and to a new record low level of 2.25%.
The rate cut comes as the nation’s economy faces a slowdown and possible slide towards a recession. Tumbling iron ore and commodity prices has weighed heavily on the nation’s growth forecasts and a stubbornly high ‘Aussie’ has put exporters at a disadvantage.
‘The available information suggests that growth is continuing at a below-trend pace, with domestic demand growth overall quite weak. As a result, the unemployment rate has gradually moved higher over the past year,’ said RBA governor Glenn Stevens in a statement.
Also weakening the Australian Dollar against its peers was the release of weak domestic data. According to the Australian Bureau of Statistics the number of building approvals issued fell by a seasonally adjusted -3.3% in December, a figure that was slightly better than the -5% recorded in the preceding month.
Analysts and investors said that the central bank’s statement signalled that it wants to see an even weaker Australian Dollar, and that it will cut rates further if the ‘Aussie’ does not drop as sharply as hoped.
The Euro meanwhile remains under pressure from concerns over the standoff between the Greek government and the Troika.
Also weighing upon sentiment for the single currency is the escalation in the violence in Ukraine and the release of weak manufacturing purchasing managers index (PMI) from the Eurozone.
Inflation data out of Italy will also influence the Euro’s movement later in the session. Economists are forecasting that the recession hit nation fell into deflation territory in January, raising fears that deflation is taking root across the Eurozone.
Euro Exchange Rates:
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,,US Dollar,1.1334 ,
Euro,,British Pound,0.7549 ,
Euro,,Australian Dollar,1.4808 ,
Euro,,Canadian Dollar,1.4264 ,