Although the Euro came under pressure of its own yesterday, the common currency was able to strengthen against a broadly softening Australian Dollar overnight.
The EUR/AUD pairing advanced as the ‘Aussie’ faltered following the publication of minutes from the latest Reserve Bank of Australia policy meeting. The Australian Dollar also lost ground against the Pound and ‘Greenback’.
While recent economic reports for Australia have been positive, increasing speculation regarding the possibility of an interest rate rise, the minutes from April’s meeting indicate that the central bank intends to keep borrowing costs low for the foreseeable future.
The central bank also warned that strength in the ‘Aussie’ could hinder long term economic growth.
In recent months the RBA has expressed less caution concerning the Australian Dollar’s exchange rate, so these minutes marked a return to the central bank’s attempts to talk down the asset.
The minutes stated; ‘The exchange rate remained high by historical standards. Despite commodity prices falling further over the past month, the exchange rate had appreciated a little further. While the decline in the exchange rate from its highs a year earlier would assist in achieving balanced growth in the economy, this would be less so than previously expected given the rise in the exchange rate over the past few months.’
The appeal of the South Pacific asset was also dented by the expectation that tomorrow’s Chinese growth data will confirm a slowing in the nation’s economy.
As strategist Stan Shamu observed; ‘There have been plenty of reports highlighting the risk of China growth falling short. Should this data miss expectations tomorrow, this could well be the trigger for some stimulus.’
Consequently the Euro was able to rally against its Australian counterpart in spite of European Central Bank President Mario Draghi’s warnings.
The Euro edged lower against almost all of its most traded rivals yesterday as Draghi insisted that ongoing Euro strength could push the central bank into introducing additional fiscal stimulus.
Furthermore, tensions in Ukraine pushed investors away from higher-risk assets like the Australian Dollar.
But the ‘Aussie’ has proven itself to be particularly resilient in recent months and the Australian Dollar largely recovered declines before the close of the local session.
As the day continues the Eurozone’s trade balance data may inspire EUR/AUD fluctuations.
Overnight investors will be focusing on Australia’s Westpac Leading Index and China’s GDP, industrial production and retail sales figures.
Euro (EUR) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,US Dollar,1.3800,
Euro,,British Pound,0.8263,
Euro,,Australian Dollar,1.4695,
Euro,,New Zealand Dollar,1.5978,
Euro,,Canadian Dollar,1.5167,
[/table]
