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Growing Populist Fears Sets EUR AUD Exchange Rate Tumbling

  • Rise of Populism Weighs on EUR AUD – Le Pen outlines her plans for leaving the EU as polls show increasing support for her National Front party.
  • Australian Unemployment Rises – ‘Aussie’s gains dampened as employment data disappoints.
  • Euro Unlikely to Improve Following ECB Meeting – Central bank expected to hold interest rates at record lows.

The Euro Australian Dollar (EUR AUD) exchange rate tumbled this morning as investors grew increasingly concerned about the rise of populism in Europe ahead of a number of key elections.

Euro Australian Dollar (EUR AUD) Slumps as Le Pen Plans Split from EU

The Euro has come under increasing pressure in recent weeks as markets worry that the rise of populism could endanger the entire Eurozone.

National Front leader Marine Le Pen, who is seeking to become France’s first female President in elections later this year, recently detailed her strategy for leaving the EU, with polls showing that she is expected to easily make it to the second round and face off with the centre-left candidate.

Len Pen promised voters ‘if I am voted in, I will announce that a referendum will be held in six months’ time’, and said that her administration would seek to form a new basket of currencies with other disillusioned Euro nations such as Greece.

This has led to warnings that the entire Euro project could collapse if leaders are unable to counter the rising discontent of voters that is fuelling populist movements such as the National Front. As JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon warned;

‘What went wrong is going wrong for everybody, not just going wrong for Britain, but in some ways it looks like they’re kind of doubling down, you’re going to have the same political things about immigration, the laws of the country, how much power goes to Brussels.’

Disappointing Rise in Unemployment Trims Australian Dollar’s (AUD) Gains

Australian Dollar gains were dampened somewhat this morning after a surprise uptick in Australia’s unemployment rate.

Australian unemployment rose from 5.7% to 5.8% in December, reaching a six-month high despite employment improving by around 13,500 over the same period.

The rise in unemployment was largely due to a lift in the participation rate as 14,700 new unemployed workers joined the labour force.

While the rise in unemployment prevented the ‘Aussie’ from maximising its gains against the Euro this morning, markets are generally not too worried about the Australian Dollar’s long term prospects, as the job market continues to grow at a faster rate than expected.

EUR AUD Exchange Rate Forecast: ECB to Meet Later Today

The European Central Bank will meet for its first policy meeting of 2017 later this afternoon and although the EUR AUD exchange rate is unlikely to see much movement from the central bank’s interest rate decision –with rates expected to remain at 0% for the foreseeable future- there could be some movement in the Euro if ECB president Mario Draghi discusses his plans for the Bank’s quantitative easing programme.

The recent uptick in Eurozone inflation has investors hoping that Draghi will finally announce some sort of tapering measures for the ECB’s bond-buying programme, however given Draghi’s dovish tone following recent meetings this seems unlikely.

Meanwhile a lull in domestic data will mean that the Australian Dollar’s fortunes are likely to closely tied to China’s GDP report tomorrow, with the ‘Aussie’ likely to slide if China misses its 6.7% growth target.

Current Interbank Exchange Rates

At the time of writing the EUR AUD exchange rate was trending around 1.41 and the AUD EUR exchange rate was trending around 0.70.