- EUR AUD Exchange Rate Climbs to 1.47 – Lowest levels since beginning of May
- RBA Optimistic About Australia Economy – Commodity trade also improving
- EUR Forecast: Eurozone PMIs on Friday – Indication of Eurozone’s economic activity
- AUD Forecast: Economic Calendar Quieter – Iron ore prices could influence ‘Aussie’
EUR AUD Exchange Rate Climbs on Wednesday
Since touching a monthly low on Tuesday, the EUR AUD exchange rate begun to climb and towards the end of Wednesday’s European session was trending at its best levels since last week. The Euro to Australian Dollar exchange rate hit a high of 1.4763 on Wednesday afternoon.
Investors remain optimistic about the Eurozone’s political and economic outlook, but Euro movement could shift on Thursday or Friday depending on key Eurozone data.
Eurozone consumer confidence data from June will come in on Thursday, followed by Markit’s preliminary Eurozone PMIs at the end of the week.
The Australian Dollar has been weakened by poor commodity news. Prices of iron ore and oil have begun to tumblr again, which has weighed on the commodity-correlated ‘Aussie’ and made it easier for EUR AUD to recover.
[Previously updated 16:54 BST 20/06/2017]
After hitting its lowest level in over a month on Tuesday morning, the EUR AUD exchange rate recovered slightly towards the end of the European session. The pair trended at around 1.4685, near the week’s opening levels.
As market confidence in a third 2017 Federal Reserve interest rate hike increased, demand for risky currencies like the Australian Dollar weakened.
The Euro was unable to capitalise, but may be able to advance later in the week if Eurozone PMIs impress investors.
[Published 10:45 BST 20/06/2017]
The Euro to Australian Dollar losing streak seems likely to continue this week, as Eurozone data and political news fails to boost the Euro and recent Australian news makes the risky ‘Aussie’ more appealing in markets.
EUR AUD began the week trading at the level of 1.4683. After edging higher on Monday, the pair eventually gave up on its advances. By Tuesday morning the pair was trending near 1.4632 – its worst levels since the beginning of May.
Euro (EUR) Fails to Benefit from Macron News
The weekend saw the second round of 2017’s French legislative elections. French President Emmanuel Macron’s ‘en Marche!’ party performed strongly and together with its ally party, MoDem, was able to secure a clear majority of 350 seats.
Investors were generally optimistic about the news as it indicated Macron would have a relatively smooth time passing through his economic reform plans.
However, analysts pointed out that Macron will likely face public opposition from some of his plans, such as his unpopular ideas for the labour market. Great public opposition could prove to be a notable obstacle for Macron.
Analysts have also noted that public turnout to the vote was surprisingly poor. Only around 43% of voters took part in the second round, which was a historic low for modern-day France.
French government spokesperson Christophe Castaner stated that the turnout indicated France’s political class had failed the public.
Overall though, the market outlook on the Euro is generally optimistic. While it has not significantly improved in recent weeks, analysts believe the currency has further to climb. According to Vincent Juvyns from JP Morgan Asset Management;
‘Political risks have reduced in Europe. We had a neutral position on Euro and an underweight position on European equity markets at the start of the year which we have been gradually upgrading to overweight over the last couple of months.’
Australian Dollar (AUD) Sturdy as RBA Optimistic
The Reserve Bank of Australia (RBA) published its latest meeting minutes during Tuesday’s Asian session. The tone was very familiar to investors, once again indicating that Australia’s economy was looking optimistic but that uncertainties remained.
The RBA’s warnings focused again on Australia’s job and housing markets, which have seen volatility and uncertainty in recent months.
Australian Dollar demand surged last week when May’s domestic jobs report beat expectations in most major prints. This bolstered market hopes that the RBA would wind down its concern about the job market in the coming months.
However, concerns remain about wage growth, with the RBA expecting wage growth to be subdued for some time.
Overall though, the minutes continued the trend of a gradual positive shift in the RBA’s tone. With the RBA seemingly increasingly confident on Australia’s overall economy, Australian Dollar investors are more confident.
Prices of iron ore, Australia’s most lucrative commodity, have also gained in recent sessions. This has supported Australian Dollar demand.
Iron ore markets rallied over the weekend and continued to rise on Monday, leaving prices at their best levels since the end of May. It marked the longest win-streak for iron ore since February.
EUR AUD Forecast: Exchange Rate Movement Could Cool
Amid a lack of fresh economic data due for most of the week, the Euro to Australian Dollar exchange rate is likely to spend most of the week reacting to commodity news or shifts in risk-sentiment.
The risky Australian Dollar will remain relatively sturdy so long as there is political stability in major economies. A surprise jump in uncertainty or a drop in prices of commodities like iron ore would weaken the ‘Aussie’ and help EUR AUD to minimise some of its recent losses.
Australia’s economic calendar will be largely quiet now for until the end of June. The only notable datasets due for publication over the next two weeks will be new home sales and private sector credit data from May, which both come in next week.
The Euro may have the opportunity to drive EUR AUD exchange rate movement later this week however.
Thursday will see the publication of June’s preliminary consumer confidence survey for the Eurozone
Most importantly, Markit’s preliminary June PMIs for the Eurozone will be published on Friday which will give traders a better idea of how the Eurozone economy has been faring this month.
EUR AUD Interbank Rates
At the time of writing this article, the EUR AUD exchange rate trended in the region of 1.4642. The Australian Dollar to Euro exchange rate traded at around 0.6830.