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Stronger Eurozone Confidence Fails to Boost Euro to Australian Dollar (EUR/AUD) Exchange Rate


Euro to Australian Dollar (EUR/AUD) Exchange Rate Tumbles on Federal Reserve News

Updated 16:58 GMT 27/02/2018:

Tuesday’s American session saw the new Federal Reserve Chairman, Jerome Powell, take part in his first Congressional Testimony in the role.

As Powell succeeded in delivering a similar cautiously optimistic stance to his predecessor, Janet Yellen, investors became more confident in the consistency of the bank’s monetary policy going forward.

As a result, relieved investors bought the US Dollar (USD). With the US Dollar strengthening broadly, it rivals, the Euro, weakened and was unable to hold the gains seen earlier in the day.

The Euro to Australian Dollar (EUR/AUD) exchange rate trended near the week’s opening levels of 1.5673 at the time of writing.

[Published 12:09 GMT 27/02/2018]

Euro to Australian Dollar (EUR/AUD) Exchange Rate Advances on Eurozone Confidence Data

Weakness in the Australian Dollar (AUD), as well as some solid Eurozone ecostats, left the Euro to Australian Dollar (EUR/AUD) exchange rate more appealing on Tuesday and the pair advanced.

After fluctuating last week and only edging higher from 1.5669 to 1.5674 throughout, could EUR/AUD see more solid gains this week instead? EUR/AUD touched on a high of 1.5732 on Tuesday morning but generally trended near 1.5715.

Demand for the Euro (EUR) was supported on Tuesday by some solid Eurozone ecostats. Tuesday morning saw the publication of the Eurozone’s final February confidence survey results, which largely met or beat expectations.

February’s final consumer confidence print did fall from 1.4 to a disappointing 0.1 as expected, but services sentiment unexpectedly rose from 16.8 to 17.5 and business confidence came in at 1.48 rather than the forecast 1.47.

Economic sentiment was also slightly better than expected, at 114.1 rather than 114.0. However, the consumer inflation expectations figure slipped from 19.6 to 18.0, indicating that expectations of stronger inflation have dulled somewhat.

Overall though, this data helped the Euro to advance against the Australian Dollar on Tuesday.

The Euro was also supported by Spain’s February Consumer Price Index (CPI) projections, which were expected to come in at -0.1% month-on-month and 0.9% year-on-year, but instead beat expectations with respective results of 0.1% and 1.1%.

Australian Dollar (AUD) Limp as Investors Anticipate Fed News

Amid a lack of notable Australian ecostats in recent sessions, the Australian Dollar has been generally unappealing to investors and has been unable to hold its ground against Euro gains.

Investors are hesitant to buy the risky Australian Dollar ahead of Thursday’s American session, when new Federal Reserve Chairman Jerome Powell is expected to hold his first Congressional Testimony.

If the Federal Reserve monetary policy outlook changes, for example if it becomes more hawkish, risky currencies like the Australian Dollar become less appealing to investors.

However, EUR/AUD gains have been limited. The Euro’s strength has only been modest and the Australian Dollar’s losses have been limited by strong commodity news.

Prices of iron ore, Australia’s most lucrative commodity, hit a 10-month-high overnight. This bolstered support for the iron ore correlated ‘Aussie’.

Euro (EUR) Strength Limited by Political Uncertainty This Week

In the coming week, a slew of notable Eurozone ecostats, as well as political developments, are likely to hit headlines. This has left Euro uncertainty high and has dampened demand for the currency.

As Italy’s 2018 general election will be held on Sunday the 4th of March and is set to be one of Europe’s biggest political events of 2018, political uncertainty in the Eurozone has risen this week.

Markets are also anxious about the status of a second German ‘grand coalition’ between Chancellor Angela Merkel’s CDU Party and the SPD Party, as the results of an SPD member poll will be announced next weekend too.

Euro to Australian Dollar (EUR/AUD) Forecast: Wednesday’s Slew of Eurozone Stats in Focus

While Tuesday’s Eurozone data was largely optimistic, investors are likely to await key data due on Wednesday before making any shifts on the shared currency.

Wednesday will see the publication of a slew of influential ecostats, including German consumer confidence survey data for March from GfK, German unemployment stats from February, and of course the Eurozone’s February inflation projections.

As Eurozone inflation remained subdued in January, investors will be looking for signs of price pressure in February’s Consumer Price Index (CPI) projections.

Eurozone inflation is forecast to have slowed slightly from 1.3% to 1.2% year-on-year in February. If inflation holds steady or rises, European Central Bank (ECB) tightening speculation could rise and the Euro outlook could strengthen.

However, as Italy’s 2018 election and the poll of Germany’s SPD members draws closer, Eurozone political uncertainty remains high and investors may hesitate to buy the Euro.

As for the Australian Dollar, news from the Federal Reserve could inspire risk-sentiment over the coming days. Besides this though, Australian housing stats due on Wednesday and manufacturing data due Thursday could also influence Australian Dollar trade.