UPDATE
The Euro to Australian Dollar (EUR/AUD) exchange rate softened by around -0.5% on Friday morning, whilst the Euro to New Zealand Dollar (EUR/NZD) exchange rate declined by around -0.2%.
In response to the Federal Open Market Committee (FOMC) decision to hold the overnight cash rate, demand for high-yielding assets spiked. This caused the Australian Dollar and New Zealand Dollar to rally against their major peers. The shared currency is trending relatively statically as many fear the Fed’s delay will prompt the European Central Bank (ECB) to ease policy sooner-than-anticipated.
The Euro to Australian Dollar (EUR/AUD) exchange rate is currently trending in the region of 1.5790.
The Euro to New Zealand Dollar (EUR/NZD) exchange rate is currently trending in the region of 1.7861.
Yesterday…
Euro to Australian Dollar (EUR/AUD) Exchange Rate Predicted to Advance on Damp Risk Appetite
The Euro to Australian Dollar (EUR/AUD) exchange rate advanced by around 0.9% on Thursday afternoon.
Although the European Central Bank (ECB) Economic Bulletin was dovish in tone, the shared currency advanced versus most of its major peers. The ECB warned of risks to growth thanks to the lack of inflationary pressures. Whilst the bulletin reassured that growth will continue in the Eurozone, the ECB stated that they expect a weaker pace than previously projected as officials attempt to create a sustainable path of inflation toward its medium term aim of just below 2%. Perhaps one of the reasons the Euro didn’t decline following the dovish bulletin is because it more or less parroted a speech from President Marion Draghi following the most recent interest rate decision.
The Euro to Australian Dollar (EUR/AUD) exchange rate is currently trending in the region of 1.5828.
Yesterday the Australian Dollar rallied versus its peers during the European session after the Shanghai Composite Index ended the session close to 5% up on opening levels. Gains were short-lived, however, amid concerns that China’s economic slowdown will have a lasting detrimental impact on Australian economic growth. Thursday’s European session has seen the ‘Aussie’ (AUD) extend losses versus its major peers after China’s equity markets ended the Asian session just over 2.0% down.
The Euro to Australian Dollar (EUR/AUD) exchange rate was trending within the range of 1.5666 to 1.5842 during Thursday’s European session.
Euro to New Zealand Dollar (EUR/NZD) Exchange Rate Strengthens despite Positive Dairy Futures
The Euro to New Zealand Dollar (EUR/NZD) exchange rate advanced by around 0.7% on Thursday afternoon.
In addition to the ECB’s Economic Bulletin, Eurozone Construction Output data was published. On the year, July’s Eurozone Construction Output advanced by 1.8%; a significant improvement over the previous figure of -1.3%. On a monthly basis, July’s Eurozone Construction Output strengthened by 1.0%; once again bettering the previous figure of -1.2%. Construction output improved in Sweden, Germany, Poland, Czech and France.
The Euro to New Zealand Dollar (EUR/NZD) exchange rate is currently trending in the region of 1.7890.
Despite the fact that dairy futures have improved significantly, the New Zealand Dollar weakened versus many of its currency rivals. The dairy price index rose 16% in the most recent dairy auction which is the third-consecutive positive outcome from dairy price auctions. However, dairy prices still remain comparatively weak having declined hugely in 2015. The improved prospect for dairy futures has kept the ‘Kiwi’ (NZD) trading higher versus its Oceanic neighbour, but the drop in the Shanghai Composite Index has seen the South Pacific currency decline versus most of its peers.
The Euro to New Zealand Dollar (EUR/NZD) exchange rate was trending within the range of 1.7669 to 1.7903 during Thursday’s European session.
FOMC Interest Rate Decision to Impact on EUR/AUD and EUR/NZD Conversion Rates
The forthcoming Federal Open Market Committee (FOMC) interest rate decision is likely to have a significant impact on currency markets. The decision will particularly impact the risk-correlated Australian Dollar and New Zealand Dollar. Should the Fed opt to tighten policy, the ‘Aussie’ and ‘Kiwi’ are likely to dive. On the flip side of the coin, if the Fed holds the cash rate the South Pacific assets could advance, depending on the tone of the accompanying press conference.
The shared currency is also likely to be affected by the FOMC interest rate decision. With the European Central Bank flirting with the prospect of expanding quantitative easing, a Fed rate hike would significantly widen policy divergence between the two central banks.
The FOMC decision is due at 19:00 UK time and 14:00 US time. Market volatility is likely to remain subdued ahead of this key report.