- EUR AUD Exchange Rate Unstable – Draghi speech appears to confirm investor fears of further quantitative easing.
- Iron Ore Prices Cool – Australian Dollar weakens as a recent surge in iron ore prices begins to reverse.
- Australian Employment – AUD volatile on mixed labour report.
The EUR AUD exchange rate stabilised this morning as European Central Bank President Mario Draghi spoke at the Euro finance week in Frankfurt.
Euro Australian Dollar (EUR AUD) Stable as Draghi Makes Speech
The Euro Australian Dollar (EUR AUD) exchange rate has remained relativity flat this morning following Draghi’s speech in Frankfurt. The ECB president was decidedly dovish in his speech as he spoke about the central bank’s need to continue supporting the economy to ensure that growth remains positive, saying;
‘The Euro area recovery still relies to a considerable degree on accommodative monetary policy. The recovery in credit is being facilitated by a more resilient banking sector, but the impetus comes from our monetary policy.’
This indicated to many investors that the ECB will seek to extend its monetary stimulus past March 2017 when it was planned to end, placing pressure on the Euro in the process. Draghi has faced significant criticism recently over the ECB’s continued quantitative easing programme despite signs of growth in the Eurozone economy, but he has remained defiant, telling markets that;
‘Even if there are many encouraging trends in the Euro area economy, the recovery remains highly reliant on a constellation of financing conditions that, in turn, depend on continued monetary support.’
While Draghi did not explicitly confirm nor deny that the ECB was planning additional financial easing, his comments will be taken as a strong indication that we can expect the Bank’s QE programme to be extended past March, which is likely to weigh on the Euro.
Falling Iron Ore Prices Weigh on Australian Dollar (AUD)
The Australian Dollar has struggled to advance against the Euro in recent days as prices of Australia’s largest export, iron ore, have begun to slump after reaching a two-year high last week.
Iron ore surged last week as muted production and rising demand in China caused prices to explode, being driven further by the surprise win for Donald Trump in last week’s US presidential election as his pledge to rebuild US infrastructure spurred market speculation.
However, moves by China to rein in the trading of raw material futures have caused iron ore prices to tumble in their largest weekly drop in six months.
Analysts had been predicting a collapse in iron ore for a number of weeks but this shift has still weighed on the Australian Dollar.
EUR AUD Exchange Rate Forecast: Mixed Australian Labour Report Prevents Movement
The EUR AUD exchange rate is likely to end the week’s session close to where it began as a mixed labour report from Australia yesterday is preventing the ‘Aussie’ from making any gains.
While the Australian unemployment rate did better than expected in October, holding at a three year low of 5.6% after it was forecast to rise to 5.7%, the increase in the number of persons employed disappointed, only reaching 9.8k after predictions that it would rise by 16.0k.
With neither market set to release any more data this week, investors will begin to look towards next week, which could see EUR AUD fluctuate as the Eurozone publishes some potentially influential reports.
Current Interbank Exchange Rates
At the time of writing the EUR/AUD exchange rate was trending around 1.43 and the AUD/EUR exchange rate was trending around 0.69.