ECB President Draghi Proves Dovish – Euro (EUR) Exchange Rates Tumble
The Euro to Australian Dollar (EUR/AUD) exchange rate saw a small decline on Friday as markets continued digesting yesterday’s rather cautious European Central Bank (ECB) rate decision, statement, and accompanying press conference.
The central bank held interest rates steady and reaffirmed their ultra-easy monetary policy stance at this meeting, indicating that no rate hike is expected for the foreseeable future and that the bank’s bond-buying scheme could extend beyond September 2018 if necessary.
Once again, the primary concern for the central bank is inflation remaining below target levels, with an ‘ample degree of monetary stimulus’ still being necessary, in their minds, until consumer prices hit a sustained climb.
ECB President Mario Draghi did provide some optimism in his accompanying press conference, however, stating that despite signs of economic moderation in recent weeks, he still sees ‘underlying strength’ in the bloc’s economy.
Alas, this did little to support the struggling Euro.
Today’s data prints were also quite notable, and included the latest German unemployment readings as well as France’s and Spain’s GDP results.
Both Spain and France saw declines in growth, but German unemployment held steady, indicating that the German labour market continues to remain tight despite the recent downbeat ecostats.
This did little to influence the EUR/AUD exchange rate.
Australian Dollar (AUD) Exchange Rates Off Lows but still in the Red – AUS PPI in Focus
The ‘Aussie’ Dollar made a small recovery on Friday but still remains at its lowest point against the Euro in over 2 years.
Australian data has been rather sparse in recent days, but today’s producer price inflation results were slightly better-than-forecast, holding at 1.7% year-on-year in Q1 2018 rather than easing to the forecast 1.6%.
Ultimately, however, the AUD/USD exchange rate remains largely beholden to the performance of the US Dollar, with the imminent US GDP release liable to be a knock it up or down.
In this regard; analysts currently expect US GDP to have eased in Q1 2018, but given the current strength of the US labour market investors aren’t overly concerned, especially when one factors in the fact that a dip in GDP at the start of the year is a strong seasonal trend.
Euro Australian Dollar (EUR/AUD) Exchange Rate Forecast: RBA Rate Decision in the Spotlight
Next week is a big one for data from both the Eurozone and Australia, with markets looking forward to the Reserve Bank of Australia’s (RBA) latest rate decision, the Australian trade balance and a variety of ‘Aussie’ private sector performance readings.
For the bloc, markets will have the latest inflation results and the Q1 GDP estimate, with inflation likely to be scrutinised given the bloc’s struggle to kick it up towards target levels.
Markets currently do not expect the RBA to move hawkishly at said meeting, but any indication of optimism regarding the trajectory of Australian inflation could put the EUR/AUD exchange rate under extended pressure.