- Euro Exchange Rates Strengthen – Greek uncertainty eases
- AUD Muted – Damp market sentiment weighs
- Federal Reserve Rate Hike Bets Cool – EUR and AUD boosted
- EUR/AUD Forecast to Fluctuate – Eurozone Consumer Confidence to provoke volatility
EUR/AUD Exchange Rate Strengthens on Consumer Confidence
As Monday’s session progresses the Euro strengthened versus many of its currency rivals. The appreciation can be linked to renewed optimism regarding Greece after President Tsipras employed heightened austerity measures in order to unlock funding from creditors.
Additional Euro gains are the result of a better-than-expected result from consumer confidence data. Eurozone Consumer Confidence was forecast to improve slightly from -9.3 to -9.0, but May’s result actually rose to -7.
(Previously updated at 10:40 on 23/05/2016)
Euro (EUR) Exchange Rates Struggle against Mixed Domestic Ecostats
In response to a mixed-bag of domestic data results, erring towards negativity, the single currency softened versus many of its closest peers. Whilst German Manufacturing, Services and Composite PMIs all bettered the respective median market forecasts in May, Eurozone sectoral growth disappointed.
May’s preliminary figures for Eurozone Manufacturing, Services and Composite PMIs all failed to meet with expected growth, with manufacturing output unexpectedly dropping.
Commenting on the Eurozone Composite PMI data, Chris Williamson, Chief Economist at Markit said: ‘A disappointing flash Eurozone PMI for May adds further to the suggestion that the robust pace of economic growth seen in the first quarter will prove temporary. The PMI is signalling lacklustre GDP growth of only 0.3% in the second quarter. The forward-looking indicators also suggest that growth is more likely to weaken further than accelerate. Inflows of new work showed the smallest rise for nearly a year-and-a-half, while optimism about the business outlook in the service sector sank to its lowest since July 2015.’
The Euro managed to avoid a larger depreciation, however, thanks to US Dollar weakness. Whilst the US asset gained significantly last week on improved bets regarding the timing of a Federal Reserve cash rate increase, many analysts still predict delays given political uncertainty regarding the UK’s EU referendum, issues in China’s economic outlook and domestic political uncertainty.
The Euro to Australian Dollar (EUR/AUD) exchange rate is currently trending in the region of 1.5513.
Australian Dollar (AUD) Exchange Rates Weaken on Damp Market Sentiment
Despite a complete absence of domestic data to provoke volatility, the Australian Dollar softened versus the majority of its most traded currency competitors. The depreciation came even in the face of US Dollar weakness and speculation of longer delays to a Fed cash rate hike.
The depreciation was initiated by dampened market sentiment thanks to weak commodity prices and volatile global equity markets. Steel and Iron Ore futures in China sank to their lowest since March thanks to weak demand and a swelling glut.
‘The market started a bit tighter, but it is going to ease. We’ve got the extra Vale iron ore coming in near the end of the year and better weather coming, adding to supply,’ said Sydney-based analysts Peter O’Connor.
Much like the Euro, however, the ‘Aussie’ (AUD) avoided a larger depreciation thanks to US Dollar weakness amid fears of delays to tighter policy. With the Reserve Bank of Australia (RBA) expected to ease policy further before the close of 2016, the longer the delay to a Fed rate hike the better for demand for the Oceanic asset.
The Euro to Australian Dollar (EUR/AUD) exchange rate dropped to a low of 1.5473 during Monday’s European session.
EUR/AUD Exchange Rate: US Manufacturing Data to Provoke Volatility
There will be a number of ecostats to be published later today with potential to cause volatility for the Euro to Australian Dollar (EUR/AUD) exchange rate. In terms of Euro movement, the most significant is likely to be May’s Eurozone Consumer Confidence report.
Also of significance will be several speeches from Federal Reserve officials. If the Fed’s James Bullard and John Williams reiterate hopes for a near-term rate hike, both the Euro and Australian Dollar will likely decline versus major peers.
Also of significance will be the US Manufacturing PMI. A positive result will likely cause marked USD appreciation given that several Fed officials have recently stated that policy changes will be subject to domestic data results.
The Euro to Australian Dollar (EUR/AUD) exchange rate reached a high of 1.5558 during Monday’s European session.