‘Aussie’ Gains Dwindle but EUR/AUD Still in Positive Territory
News that private loans in the Eurozone have increased hasn’t been enough to push the EUR/AUD exchange rate out of negative territory. The Euro is performing well against some currencies after the news that businesses and consumers are borrowing more money, which will then be injected into the economy, although the Australian Dollar remains in its current strong position.
The first piece of data for either the Eurozone or Australia – the Eurozone M3 money supply – has been released today, giving traders something to focus on despite its relatively low-impact nature. The Australian Dollar is trending upwards against its most traded currencies, while the Euro is having more mixed fortunes across the board.
EUR/AUD Exchange Rate Forecast: Traders Concerned Over Rate Hike Prospects as Eurozone M3 Money Supply Falls
The total amount of money in circulation in the Eurozone has dropped slightly this month, with trader uncertainty causing the Euro to fall against the Australian Dollar as a result. M3, the broadest measure of the total money supply in the Eurozone nations, which includes currency in circulation, money market shares, bank deposits, debt securities and repurchase agreements, fell from 5.3% to a seasonally-adjusted 5.1% year-on-year (YoY).
A drop in the M3 money supply shows that less money is in circulation, meaning the Euro’s purchasing power increases, which should push the EUR/AUD exchange rate up. However, a larger M3 fuels consumer spending, causing price inflation. Considering the European Central Bank (ECB) cut the deposit rate in an attempt to boost the money supply and drive inflation, a drop in M3 suggests that the opposite to their intentions is happening, which would mean the future growth of Eurozone inflation could remain sluggish despite their efforts.
The Euro is experiencing mixed fortunes, trending down -0.1% against the Australian Dollar (AUD) and the Japanese Yen (JPY), while trading near opening levels against Pound Sterling (GBP) and the US Dollar (USD) and advancing 0.2% against the Canadian Dollar (CAD) and 0.5% against the Polish Zloty (PLN).
AUD/EUR Exchange Rate News: Australian Dollar Rallies Thanks to High-Yield Bonds
Australian bonds continue to be an attractive choice for investors after news that bond yields have rallied again in 2015, marking the sixth consecutive yearly increase. Japan is the only other developed debt market to see a similar performance, with yields rising for twelve years in a row amidst deflationary pressures. Since 2009 Australian bonds have increased their yield by 45%, making them highly attractive to investors, supported by the country’s AAA rating.
The success of the Australian financial sector, which has seen managed investment trusts more than double to AUD$43.6 billion from AUD$20.3 billion in five years, has provided a note of confidence as 2016 draws nearer. Not only are overseas investors using Australian fund managers to invest in Australian assets, they are also using them to invest in global assets, with countries like Japan, New Zealand and Korea being particularly lucrative customers. The success of another sector will help ease the wounds caused by the dropping commodity prices on mining and industrial segments of the economy.
The ‘Aussie’ is currently trending up 0.1% against the Euro, Pound Sterling, the US Dollar and the New Zealand Dollar (NZD) and 0.3% against the Canadian Dollar (CAD) and the Chinese Yuan Renminbi (CNY).
The AUD/EUR exchange rate is currently trading between 0.6656 and 0.6686.
EUR/AUD Exchange Rate Forecast: Small Releases Could Have Big Impact During Period of Sparse Data
There is no data for the Eurozone due until Monday 4th of January, which will see a glut of data, including the Spanish Consumer Confidence Index and the final Markit Manufacturing PMIs for Italy, France, Germany, Greece and the Eurozone Area. Until then movement in the EUR/AUD exchange rate will come mostly from the Australian Private Sector Credit data tomorrow and the AIG Manufacturing Index on Sunday.
The Euro to Australian Dollar (EUR/AUD) exchange rate is currently trading between 1.4949 and 1.5021.