Could Euro to Australian Dollar Exchange Rate Reach Even Higher?
After touching its best levels in 3 years during Monday’s Asian session, the Euro to Australian Dollar (EUR/AUD) exchange rate slipped, as the weak Australian Dollar (AUD) regained just a little of its recent significant losses.
Last week saw EUR/AUD surge as a sturdy Euro (EUR) capitalised on Australian Dollar (AUD) weakness. EUR/AUD opened the week at the level of 1.5863 and gained over two cents, closing the week at the level of 1.6136.
On Monday, EUR/AUD briefly touched the level of 1.6164 – its best level since August 2015. At the time of writing though, EUR/AUD had slipped into the region of 1.6088.
Investors bought the battered Australian Dollar back from its cheapest levels in a small bout of profit-taking. It was able to more easily climb against the Euro, as the latest Eurozone ecostats were underwhelming.
Euro (EUR) Exchange Rates Fail to Hold Ground as Eurozone Trade Jitters Worsen
Monday saw the publication of the Eurozone’s final August PMI results from Markit, which fell short of projections in some key prints.
France’s manufacturing PMI was projected to have risen from 53.3 to 53.7, but instead only edged higher to 53.5. German manufacturing, on the other hand, fell more than expected from 56.9 to 55.9.
While the Eurozone’s overall manufacturing PMI actually met projections and slipped from 55.1 to 54.6, the German print made investors more anxious about the possibility that the Eurozone’s economy was beginning to be more impacted by US trade protectionism.
According to Chris Williamson, Chief Business Economist at IHS Markit:
‘Worries about trade wars and the damaging impact of tariffs, as well as Brexit and other political worries, all contributed to a dampening of business optimism about the year ahead.’
Uncertainties in the otherwise solid Eurozone economic outlook dampened Euro demand, making it a little easier for the Australian Dollar to regain some ground.
Australian Dollar (AUD) Exchange Rate Rebounds from Worst Levels
Despite the significant downside pressure on the Australian Dollar, investors bought the embattled risky currency back from its cheapest levels in profit-taking on Monday.
The Australian Dollar touched significant lows against major rivals like the Euro and US Dollar (USD), in some cases hitting its worst points in years.
As the currency hit fresh lows, key resistance levels and technical buying led to a rebound. At the time of writing on Monday, the Australian Dollar was the day’s best performing major currency thanks to this rebound.
However analysts do not expect this rebound to continue, and recent Australian news continues to put downside pressure on the Australian Dollar too.
Monday’s Asian session saw the publication of Australia’s July retail sales results, which fell short of 0.3% forecasts and came in at a stagnant 0.0%.
On top of this, broad concerns about worsening US trade tensions with nations like China and Australia have made investors hesitant to buy risky trade-correlated currencies like the ‘Aussie’.
Euro to Australian Dollar (EUR/AUD) Forecast: Reserve Bank of Australia (RBA) Decision in Focus
Unless there are some hawkish surprises from the Reserve Bank of Australia (RBA) this week, the Euro to Australian Dollar (EUR/AUD) exchange rate could climb back towards its best levels before too long.
Analysts expect the Australian Dollar’s Monday rebound will be limited, and the significant amount of downside pressure on the ‘Aussie’ could see its bearish movement continue too.
However, the RBA will hold its September monetary policy decision on Tuesday, and if it is more optimistic about the health of Australia’s economy this could help the Australian Dollar to mount a more solid recovery.
On the other hand though, if the RBA plays up concerns about global trade uncertainties, Australian political turbulence or Australia’s economic stability, the Australian Dollar’s rebound is likely to be stopped short.
As for the Euro, it is likely to remain driven by the strength of its rivals, though worsening political jitters could prevent it from climbing too high.
Major ecostats due on Wednesday could influence the Euro to Australian Dollar (EUR/AUD) exchange rate too, including services PMIs from both Australia and the Eurozone, as well as Australia’s key Q2 growth rate stats.