Overnight the Australian Dollar was able to extend its recent gains against the Euro as commodity-driven and emerging market currencies were supported by the news that Turkey’s central bank had taken steps to protect the Lira from further declines.
In Turkey policy makers opted to increase interest rates to help investors rediscover their appetite for risk and both the ‘Aussie’ and ‘Kiwi’ advanced during Australasian trading as a result.
In the opinion of currency strategist Robert Rennie: ‘There’s a keen sense that the authorities in some of the more vulnerable emerging markets are acting to address market volatility. From the Aussie point of view, we’ve had a run of stronger data, so there’s a sense that there’s some economic improvement coming through’.
However, the Australian Dollar’s advance on the Euro was slightly tempered as the common currency was supported by an upbeat consumer confidence report for Germany.
While economists forecast that the GfK consumer confidence measure for February would achieve 7.6 it actually surged to 8.2 from a positively revised 7.7 in January.
The result is an over six year high and reflects the comparatively upbeat economic situation in the Eurozone’s largest economy.
The data indicates that the upward trend in consumer confidence is picking up speed as low interest rates and the prospect of rising wages encourage household spending.
In a statement issued with the figure GfK observed that ‘Germans consider the domestic economy to be clearly on the upturn at present. The considerable increase in the consumer climate is further boosted by a recent slump in propensity to save’.
A measure of income expectations advanced to a 13-year high while gauges of economic expectations and willingness to buy also showed a positive increase.
Given the data which is scheduled for release over the next 24 hours we forecast that the Euro to Australian Dollar exchange rate will recover losses.
Although the ‘Aussie’ is being supported by encouraging domestic reports and the calming of emerging markets, if the Federal Reserve opts to taper stimulus by the $10 billion expected higher-risk assets will lose some of their appeal.
Australian new home sales data could also weigh on the currency if November’s 7.5 per cent month-on-month gain isn’t followed by another positive result.
Furthermore, economists are expecting the Euro to be boosted tomorrow by German unemployment data, with the level of joblessness in the nation falling by 5,000.
Separate reports are also expected to show an improvement in Eurozone economic/industrial/services confidence – factors which could help the Euro gain on its currency counterparts.
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,1.3674,
Euro,,British Pound,0.8238,
Euro,,Australian Dollar,1.5569,
Euro,,New Zealand Dollar,1.6515,
Euro,,Canadian Dollar,1.5265,
[/table]
