Euro Extends Gains Against Australian Dollar as Consumer Price Index Shows Slight Growth
A 0.1% rise on the Consumer Price Index may not be significant news, but it is a step in the right direction for the flagging Euro. With European Central Bank (ECB) President Mario Draghi having suggested further economic stimulus could be required to prevent deflation, today’s minor Year-on-Year (YoY) rise has at least demonstrated that the Eurozone economy is moving in a positive direction. The EUR/AUD exchange rate is currently up 0.5% to trend around 1.5109.
Last week saw the EUR/AUD exchange rate slump, with strong domestic jobs data strengthening the Australian Dollar, while the Euro was further weakened as a result of crises in Portugal and Greece. However, a strong US Dollar (USD) has since seen ‘Aussie’ growth falter.
EUR/AUD Exchange Rate Trending Narrowly as Eurozone Crises and Draghi Comments Weigh Common Currency Down
Deepening political and economic trouble in the Eurozone has seen the Euro soften against most the major currencies. As well as political turmoil, in which Portugal’s government collapsed in the face of left-wing opposition, the nation’s third-largest lender – Novo Banco – has been ordered by the European Central Bank (ECB) to fill a capital shortfall of €1.4 billion. The bank has two weeks to submit an action plan and nine months to implement its solution, but with an anti-austerity coalition waiting to take power, how these new Eurozone conditions will be addressed remains to be seen.
In further bad news, negotiations between Greece and its Eurozone creditors have failed to reach a consensus, missing the deadline for the delivery of the next tranche of bailout funding. The delivery of the €2 billion has been pushed back yet again as Prime Minister Alexis Tsipras attempts to protect first-time home owners from new repossession measures.
In the wake of such disruption it is hard to gauge the impact that Friday’s tragic terrorist attacks has had on the Euro, however it is likely to be contributing to the currency’s current downtrend.
The EUR/AUD exchange rate is experiencing volatility, trending narrowly in the region of 1.5053.
AUD/EUR Exchange Rate Down as Further Hopes of US Fed Rate Hike Holds Australian Dollar Growth in Check
A greater-than-expected performance by the Australian labour market saw the ‘Aussie’ shoot up last week. 58.6k new jobs were created in October – nearly four times the anticipated 15k, with 40,000 more Australians now in full time employment than the previous month. Unemployment defied predictions that it would hold steady at 6.2% by falling to 5.9%. The positive news for the jobs market eased the pressure on the Reserve Bank of Australia (RBA) to cut interest rates in order to try and boost flagging inflation and saw AUD/EUR shoot up to a three-month high of 0.6667.
However, the progress of the Australian Dollar has since been limited by a strong US Dollar (USD) as it becomes increasingly likely that the Federal Reserve will increase interest rates in December. A lot of positive data has been posted since Fed Chair Janet Yellen suggested a rise might be on the cards and releases due on Tuesday, including the Consumer Price Index, could make a rate hike as-good-as certain. This confidence has strengthened the ‘Buck’, slowing ‘Aussie’ growth and allowing the Euro to regain some lost ground.
The AUD/EUR exchange rate is currently trending between 0.6620 and 0.6646.
EUR/AUD Exchange Rate Forecast: Volatility Ahead With Eurozone Consumer Price Index and US Data Releases
European Central Bank (ECB) President Mario Draghi has already suggested more economic stimulus could be needed. The Eurozone Consumer Price Index is due out later today, forecast to hold steady at 1%. The result will give a strong indicator of the direction the ECB will take.
Similarly, a slew of US data due out tomorrow is likely to show that the Consumer Price Index has risen 0.1%. Industrial Production and Average Weekly Earnings figures are likely to rise too, after contracting slightly the previous month. This will translate into gains for the US Dollar, holding back the Australian Dollar, although a vulnerable Euro may still experience some losses.
The EUR/AUD exchange rate is currently trending narrowly between 1.5039 and 1.5101.