Euro Australian Dollar (EUR/AUD) Exchange Rate Weakens in Spite of RBA Hold
Trade war fears kept the Euro to Australian Dollar (EUR/AUD) exchange rate under pressure on Tuesday as tensions between the US and EU continued to rise.
Demand for the Australian Dollar (AUD) strengthened, meanwhile, in the wake of the Reserve Bank of Australia’s (RBA) latest policy meeting.
Although policymakers left interest rates on hold and maintained a generally dovish outlook, as expected, AUD exchange rates were still encouraged to trend higher across the board.
Investors took heart from the confidence the RBA expressed in the outlook of the domestic jobs market, even though worries remain over a lack of convincing wage growth.
AUD exchange rates could struggle to hold onto these gains for long, however, as Matthew Hassan, research analyst at Westpac, noted:
‘The RBA still looks to be firmly on hold and prepared for a long wait. The minutes should reveal more about the Board’s deliberations – the discussion of short term wholesale interest rates will be of particular interest as well as the risks around a further tightening in lending standards. However, there’s unlikely to be any shift in rhetoric from the Bank any time soon.’
EUR/AUD Exchange Rate Slips Lower on Disappointing Eurozone Data
While political jitters over the future of the German coalition stabilised this failed to particularly benefit the Euro to Australian Dollar (EUR/AUD) exchange rate.
Market concerns persist with regards to the outlook of the Eurozone economy, which has struggled to recover its lost momentum in the second quarter.
Confidence in the Euro (EUR) diminished further as May’s Eurozone retail sales data disappointed forecast.
As sales stagnated on the month this gave investors little cause for optimism, indicating that domestic sentiment is weakening in response to rising global uncertainty.
Even though May’s producer price index figures proved more positive this was not enough to shore up EUR exchange rates on Tuesday morning.
Widened Australian Trade Surplus Forecast to Extend Euro Australian Dollar Exchange Rate Slump
The Euro to Australian Dollar (EUR/AUD) exchange rate could come under further pressure on the back of Wednesday’s Australian trade balance figure.
If the Australian trade surplus widened on the month in May confidence in the outlook of the domestic economy is likely to improve.
Even though the data is not likely to prompt any material shift in the outlook of the RBA a strong showing here could still give the Australian Dollar a fair boost.
On the other hand, any signs of weakness within the Australian economy may offer the EUR/AUD exchange rate a rallying point.
With forecasts pointing towards a slowdown in May’s retail sales data the Australian Dollar may well falter in the near term.
As long as trade war risks persist, however, the Euro to Australian Dollar (EUR/AUD) exchange rate looks set to remain vulnerable.
