The Euro to Australian Dollar (EUR/AUD) exchange rate remained in a tight range during Thursday’s session as weak Australian Retail Sales figures kept the ‘Aussie’ lower, and the European Central Bank (ECB) cut off direct funds to Greece amid negotiations softening the Euro.
The Euro exchange rate has remained rather buoyant of late as investors speculated that the possibility of a Greek exit from the Eurozone is slim. However, negotiations between Greece and the Troika appear to be getting more heated and the ECB has now restricted Greece’s access to liquidity.
Industry expert Gary Jenkins commented: ‘Greek financial institutions will still have access to liquidity via the emergency liquidity assistance programme via the Greek central bank, although the ECB gets to review this use every two weeks. So a very large warning shot has been fired across the Greek bows by the ECB.’
‘It is difficult to see this as anything other than a very aggressive move by the ECB. They did not need to do it now (they were expected to make a decision at the end of the month) and whilst they claim that they are following their rules they have oft amended them during the crisis, as has the Eurozone as a whole. After all, there are not supposed to be any bail outs…’
Meanwhile, the Australian Dollar to Euro (AUD/EUR) exchange rate was offered little support after some unfavourable Aussie data emerged and oil prices continued to fall. Australian HIA New Home Sales declined by -1.9% in December after November’s 2.2% growth. Australian Retail Sales grew by 0.2% in December, a little short of the 0.3% forecast.
In addition, the People’s Bank of China (PBOC) made a surprise cut to its Reserve Requirement Ratio (RRR) in an attempt to stimulate growth–a development that offered the Australian commodity currency a little support.
China chief economist at ANZ Li-Gang Liu commented: ‘While we view today’s RRR cut as a positive move, further monetary policy easing by the PBOC is still required to stop the economy from falling below 7% in the first quarter and fend off rapid dis-inflationary pressures. We expect another two 50 basis points of cuts this year, and the deposit rate will be cut by up to 50 basis points.’
China is Australia’s largest trading partner and therefore any developments in the nation can have a significant effect on the Australian Dollar exchange rate.
Euro to Australian Dollar (EUR/AUD) Exchange Rate Forecast
The Euro to Australian Dollar (EUR/AUD) exchange rate could feel the impact of ongoing negotiations in Greece, with any possibility of a Greek exit likely to see the Euro tumble.
In addition, ECB officials are scheduled to speak throughout the day and could also influence EUR/AUD trading.
The Euro to Australian Dollar (EUR/AUD) exchange rate is trending in the region of 1.4653. The Australian Dollar to Euro (AUD/EUR) exchange rate is residing at 0.6826.
