- EUR AUD Weakened by European Political Landscape – Marine Le Pen seen as frontrunner for right.
- Australian Dollar Bolstered by Commodity Prices – Iron Ore Prices reach new multi-year high.
- German GDP Ahead – Euro May rise if German growth remains robust in last quarter of 2016.
The Euro Australian Dollar (EUR AUD) exchange rate hit a new 18-month low this morning as the Euro’s string of losses continued over the increasing uncertainty of the political landscape in the Eurozone.
Rising Populism Weakens Euro Australian Dollar (EUR AUD)
The Euro tumbled on Thursday as far-right Nation Front (NF) leader Marine Le Pen looks set to sail through the first round of the French elections and is now also seen as a real threat in the second round.
Her recent surge in support follows the drop in the polls of her main right-wing rival Francois Fillon. Previously seen as a frontrunner for the presidency Fillon has plummeted in opinion polls following allegations he used public funds to pay his wife a salary for a job she never carried out.
Polls have previously predicted that Le Pen’s NF party would be easily brushed aside in the second round as she meets centrist independent Emmanuel Macron, however in speaking to Le Monde, Fillon warned that his dropping out of the race could see Le Pen as a viable contender in the second round as he predicts his supporters will flock behind her instead. Saying;
‘My voters will go straight to Le Pen. People of the right who saw themselves deprived of their candidate [Fillon] would be extremely angry.’
With the upsets of both Brexit and Trump still fresh in the memories of investors, the growing uncertainty following the recent developments have caused most to steer clear of the single currency.
Australian Dollar Rises Following Surge in Iron Ore Prices
The Australian Dollar’s recent rise against the Euro has been aided by yet another rally in iron ore, with prices reaching a new multi-year high during trading on Thursday.
The spot price for benchmark 62% fines jumped to $83.84 a tonne yesterday, reaching its highest level since October 2014, mirroring a recent rise in Chinese steel prices as Metal Bulletin explained;
‘Continual gains in the billet market and active trading over the past couple of days pushed up spot rebar prices again during the day. Sellers are also expecting demand to pick up next week when the construction sector gradually starts work.’
Prices are expected to stay high for at least a little longer, with analysts predicting that they will hold in the first quarter of 2017 as it is a seasonally strong period for the commodity, although most traders predict that prices will unwind later in the year as the markets begin to correct themselves.
EUR AUD Exchange Rate Forecast: German GDP Ahead
The EUR AUD exchange rate is likely to remain subdued for the remaineder of the week’s session thanks to a lull in data, but may begin to pick up next week following the release of Germany’s latest economic data.
The Euro may strengthen on Tuesday should Germany’s GDP continue to show growth in the fourth quarter as expected, while a forecasted surge in German inflation is likely to send the single currency even higher.
Meanwhile the Australian Dollar could be softened by Westpac latest Consumer Confidence should the recent pessimism amongst consumers persist.
Current Interbank Exchange Rates
At the time of writing the EUR AUD exchange rate was trending around 1.40 and the AUD EUR exchange rate was trending around 0.71.