The Euro to Australian Dollar (EUR/AUD) exchange rate edged is trending within a narrow range on Friday morning.
After the European Central Bank opted to loosen monetary policy in order to combat deflation in the Eurozone, the shared currency slumped across the board. Friday has seen the decline extended versus many of its major peers.
In the initial aftermath of the ECB decision, the ‘Aussie’ (AUD) gained thanks to demand for gold amidst risk-averse trading. However, anxieties that the policy easing from Canada and Europe will provoke a devaluation battle have amplified cautious trade. The Reserve Bank of Australia is thought to be the most likely candidate to follow the easing trend at their next policy meeting.
The Euro to Australian Dollar (EUR/AUD) exchange rate is currently trending in the region of 1.4164.
Yesterday…
The Euro to Australian Dollar (EUR/AUD) exchange rate dived by around -1.40% on Thursday afternoon.
In the wake of an announcement by European Central Bank (ECB) President Mario Draghi, who stated the ECB will begin a €60 billion a month quantitative easing programme, the single currency dived across the board.
The Australian Dollar, meanwhile, strengthened versus many of its major peers after the ECB announcement bolstered demand for gold. The ‘Aussie’ (AUD) appreciation can also be attributed to the prospect of cheaper trade with Europe.
The Euro to Australian Dollar (EUR/AUD) exchange rate is currently trending in the region of 1.4142.
Euro (EUR) Exchange Rate Dives on QE
European Central Bank policymakers decided on Thursday that the time was ripe for quantitative easing, a move most experts foresaw. However, the announcement of an aggressive €60 billion per month bond-buying programme took many by surprise, causing the shared currency to soften versus all of its major rivals.
‘While the sharp fall in oil prices over recent months remains the dominant factor driving current headline inflation, the potential for second-round effects on wage and price-setting has increased and could adversely affect medium-term price developments,’ Draghi said.
The Euro to Australian Dollar (EUR/AUD) exchange rate has fallen to a low today of 1.4105.
Australian Dollar (AUD) Exchange Rate Gains on Gold
The ECB stimulus programme has supported demand for bullion which, in turn, is supporting demand for the Australian Dollar. ‘It’s (ECB QE) slightly higher than what the market was expecting, so we saw some buyers come in to the gold market,’ Adam Klopfenstein, a senior market strategist stated. ‘Investors are torn between whether to continue the flight to quality, or invest more cash into the equity market because of further injection of cheap capital.’
The Australian Dollar surge also gained from the prospect of cheaper trade with Europe after the latest stimulus announcement.
Euro to Australian Dollar (EUR/AUD) Exchange Rate Forecast to Hold Losses
Given the lack of data to provoke changes, and the fact that the extent of the QE programme was unexpected, the Euro to Australian Dollar (EUR/AUD) exchange rate is likely to hold losses for the remainder of Thursday.
The Euro to Australian Dollar (EUR/AUD) exchange rate advanced to a high today of 1.4144.