UPDATE
The Euro to Australian Dollar (EUR/AUD) exchange rate advanced by around 0.5% on Tuesday morning.
As traders await Euro-area nations to vote on the new terms for Greece’s third bailout package, the shared currency is generally holding steady versus its major peers. Today will see Spain, Estonia and Austria vote. With a complete absence of domestic data, trader focus will be dominated by the progress made toward Greece’s financial aid.
Despite the fact that the Reserve Bank of Australia was comparatively positive with regards to ‘Aussie’ (AUD) valuation in the minutes from the most recent policy meeting, the Australian Dollar softened versus many of its peers in the early stages of Tuesday’s European session. This is partly due to gloomy iron ore futures, but is also in response to the RBA looking towards a Federal Reserve rate hike to devalue the South Pacific asset to levels that can aid economic recovery.
The Euro to Australian Dollar (EUR/AUD) exchange rate is currently trending in the region of 1.5101.
Yesterday…
Euro (EUR) Exchange Rate Edges Higher on Eurozone Trade Balance Data
The Euro to Australian Dollar (EUR/AUD) exchange rate softened by around -0.1% on Monday afternoon.
With sentiment improving towards the common currency now that Greece has made significant progress towards receiving bailout funds, the Euro edged higher. Most traders are now confident that the Hellenic nation will be able to repay the European Central Bank (ECB) on the August 20th deadline. However, there are concerns bubbling under the surface which have anchored the single currency to a large extent. Principle amongst these fears is that Germany will favour another bridging loan over the current bailout deal, potentially delaying the process further.
Eurozone Trade Balance data managed to better median market forecasts, which aided the Euro uptrend. June’s Trade Surplus was projected to improve from €18.8 billion to €23.2 billion, but the actual result reached €26.4 billion. The wider surplus was to be expected given the low value of the Euro and the decreasing demand for imports amid geopolitical upheaval in Greece.
The Euro to Australian Dollar (EUR/AUD) exchange rate is currently trending in the region of 1.5001.
Australian Dollar (AUD) Exchange Rate Softens on Iron Ore Outlook
Although market sentiment improved as the People’s Bank of China (PBoC) looks to have stabilised the Yuan, the Australian Dollar slumped versus its major peers on Monday morning. The downtrend can be attributed to dovish comments from the National Australia Bank (NAB). The bank believes ’the market is not pricing the Fed’s expected September hike adequately’, suggesting that the ‘Aussie’ (AUD) is likely to tumble significantly.
Also weighing on demand for the ‘Aussie’ is the outlook for iron ore prices. Goldman Sachs stated that iron ore prices could tumble as much as 30% over the coming 18 months as supply continues to outweigh demand. ‘Supply is likely to diverge further from demand,’ analysts Christian Lelong and Amber Cai wrote in a report. ‘Contrary to market consensus, we believe that peak-steel production will be followed by a contraction’ in China, they wrote. However, the South Pacific asset recovered its losses as Monday’s European session progressed following a report from North America which showed US manufacturing slumped unexpectedly. This caused many traders to fear that the Federal Reserve will dalay a rate hike until 2016 which is Australian Dollar supportive.
The Euro to Australian Dollar (EUR/AUD) exchange rate dropped to a low of 1.4992.
Euro to Australian Dollar (EUR/AUD) Exchange Rate Forecast to Hold Gains on Fed Bets
With many analysts predicting that the Federal Reserve will be looking to hike the cash rate within the next few policy meetings, demand for the Australian Dollar has cooled significantly. Given the absence of further domestic data publications to provoke changes, the EUR/AUD exchange rate is likely to hold gains for the remainder of Monday’s European session.
Tuesday’s Australasian session will see the publication of minutes from the Reserve Bank of Australia (RBA) August meeting minutes, which should have an impact on the EUR/AUD exchange rate. An absence of European economic data on Tuesday is likely to see common currency movement subject to geopolitical developments and outside influence.
The Euro to Australian Dollar (EUR/AUD) exchange rate climbed to a high of 1.5108.
