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Euro to Australian Dollar Exchange Rate fluctuates as Ukraine fears spark risk aversion

Ahead of the release of today’s influential European reports the EUR/AUD exchange rate was trading lower.

Although the ‘Aussie’ ended the Australasian session slightly weaker against its major currency counterparts, the bout of risk aversion triggered by Putin’s assertion that Russia has the right to intervene in the situation in the Ukraine also softened the Euro.

The Australian Dollar moved to a one-month low against its US counterpart ahead of tomorrow’s Reserve Bank of Australia policy meeting and failed to benefit from the news that China’s non-manufacturing PMI climbed from 53.4 in January to 55.0 in February.

China’s HSBC/Markit manufacturing PMI came in at 48.5, down from 49.5 in January but in line with expectations. The Chinese manufacturing report published on Saturday was slightly more positive, with that output gauge declining to 50.2 rather than 50.1.

As China is Australia’s biggest trading partner these reports did have an impact on the desirability of the Australian Dollar, but currency market movement was primarily dictated by developments in the Ukraine.

Similarly, Australia’s AiG performance of manufacturing index showed a slower pace of contraction in February, with the measure rising from 46.7 to 48.5.

As observed by senior currency strategist Emma Lawson; ‘We’re starting the week with a risk-off tone from the events over the weekend, with the Russian and Ukrainian tensions escalating. It tends to be on geopolitical risk that currencies like the Aussie do tend to underperform’.

However, the Euro is also feeling the pressure ahead of the European Central Bank’s rate decision on Thursday.

With some investors betting that the ECB will introduce additional easing measures the Euro struggled against peers like the ‘Aussie’.

But the EUR/AUD pairing may reverse declines in the hours ahead as measures of manufacturing output for France, Italy, Germany and the Eurozone as a whole surprised to the upside.

The data showed that the pace of manufacturing contraction in France slowed by more-than-expected last month while Germany and the Eurozone enjoyed stronger-than-forecast manufacturing growth.

While developments in Eastern Europe are likely to be the main driver of currency market movement, additional EUR/AUD fluctuations will be triggered overnight following the RBA decision.

Investors believe that the RBA will refrain from cutting interest rates or introducing any additional stimulus.

Tomorrow’s Eurozone producer price index will also be of interest.

Euro (EUR) Exchange Rates

[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate , 
Euro,,US Dollar,1.3775
Euro,,British Pound,0.8236,
Euro,,Australian Dollar,1.5423,
Euro,,New Zealand Dollar,1.6441,
Euro,,Canadian Dollar,1.5226,

As of 09:15 GMT