Euro to Australian Dollar (EUR/AUD) Exchange Rate Forecast to Dive as ECB Policy Meeting Draws Closer
The Euro to Australian Dollar (EUR/AUD) exchange rate softened by around -1.0% on Wednesday afternoon.
As Thursday’s European Central Bank (ECB) policy meeting draws ever closer, expectations of dramatic policy changes is weighing on demand for the single currency. With deflationary pressures rife in the Eurozone, a combination of cutting the overnight cash rate and expanding quantitative easing is expected by most analysts.
Writing for Bloomberg, Mohamed El-Erian stated;
‘The main question to ask before the ECB’s meeting should not be whether officials will do more. They will. Rather, it is how quickly they will inadvertently approach the unfortunate situation that the Bank of Japan now finds itself in—that of reduced policy effectiveness and increased political vulnerability. No one who cares about the health of Europe and the global economy would want another systemically important central bank getting to that stage.’
The Euro to Australian Dollar (EUR/AUD) exchange rate is currently trending in the region of 1.4655.
Australian Dollar to Euro (AUD/EUR) Exchange Rate Forecast to Rally as Market Sentiment Improves
Yesterday the Australian Dollar registered significant losses versus most of its major peers in response to disappointing trade data out of China. However, today has seen a marked ‘Aussie’ (AUD) recovery after market sentiment improved in response to more intervention from the People’s Bank of China (PBoC).
Zhou Xiaochuan, the governor of the People’s Bank of China, recently commented that ‘monetary policy can help supply-side economic restructuring succeed by more appropriately managing demand.’
Also supporting demand for the ‘Aussie’ was a significant rise in iron ore prices. ‘The AUD outperformed, which is unsurprising given the spectacular jump in iron ore prices, rising from 0.7400 to 0.7485, an eight-month high,’ the Westpac economists said in a note on Tuesday.
The Euro to Australian Dollar (EUR/AUD) exchange rate dropped to a low of 1.4594 during Wednesday’s European session.
Euro to Australian Dollar Exchange Rate Forecast: ECB Policy Decision to Provoke Significant Volatility
Thursday’s ECB interest rate decision is the principle focus for traders this week. Expectations of significant easing has limited the appeal of the Euro, but there is the potential for the Euro to strengthen if the central bank doesn’t ease policy as much as has been priced-in.
Whilst the ECB’s rate decision should cause EUR/AUD exchange rate losses, the ‘Aussie’ is likely to struggle against most of its major peers in response. This is due to the likelihood that the US Dollar will surge if the Euro declines as a result of negative correlation.
The Euro to Australian Dollar (EUR/AUD) exchange rate reached a high of 1.4821 during Wednesday’s European session.