At the close of last week’s European session, the Euro to Australian Dollar (EUR/AUD) exchange rate was trending in the region of 1.3815.
Last week domestic data had minimal impact on both the shared currency and the ‘Aussie’ (AUD) as geopolitics and central bank decisions respectively dominated movement for the pairing. It is very possible that the coming week will see much of the same with Greek woes far from abating, and with market sentiment and commodity fluctuations driving changes for the Oceanic currency.
Euro (EUR) Exchange Rate Forecast to Fluctuate on Geopolitics
With all the troubles surrounding Greece dominating investor focus, there is a high potential that domestic data won’t be particularly impactful over the coming week. Traders will be waiting to see if the debt-riddled nation will produce an acceptable reform program in the time given by Eurozone members.
Should they fail to meet with the strict ultimatum, the result could be a forced exit from the Eurozone. However, should they succeed; attention is likely to be diverted to the progress of the quantitative easing program which is still very much in its infancy.
For those invested in the single currency, however; Eurozone Industrial Production, German Consumer Price Index, EU-Harmonised German CPI, ECB Deposit Facility Rate, ECB Marginal Lending Facility, ECB Survey of Professional Forecasters, Eurozone Consumer Price Index and Eurozone Core CPI will be of interest.
The European Central Bank (ECB) will also be making the benchmark interest rate decision. This could possibly have less significance than in ordinary situations with most agreeing that little will be changed with QE very much in early stages.
Australian Dollar (AUD) Exchange Rate Forecast to Soften
With the situation in Greece having a detrimental effect on investor risk-appetite, there is a high likelihood that the high-yielding Australian Dollar will soften. This would be a positive for the Reserve Bank of Australia (RBA) who saw the ‘Aussie’ jump after keeping the cash rate on hold, despite openly confirming they want the South Pacific asset to fall in value.
With market sentiment likely to be the focal point of ‘Aussie’ investment, domestic data may not have much of an impact. Two publications that are likely to be impactful, however, will be March’s Employment Change and Unemployment Rate.
However, for those trading with the Australian Dollar; Nab Business Conditions, Consumer Inflation Expectation and Full Time Employment Change will be of interest. Additionally there will be several Chinese economic data publications which may provoke ‘Aussie’ movement, particularly growth and trade balance data.
If Greece do manage to produce a program of reform acceptable to creditors, it is unlikely to be the end of their difficulties. The new government will have to compromise on the policies which won them power, and so a backlash from the Greek people would be inevitable.
Oil prices will likely play a strong role in dictating ‘Aussie’ volatility. Not only is the Australian Dollar commodity-correlated, but it is risk-correlated too. Low crude prices generally leads to a lull in trader risk-appetite.
China’s New Yuan Loans and Aggregate Financing data publications, due on Sunday, may impact on Australian Dollar movement.
At the close of last week’s European session, the Euro to Australian Dollar (EUR/AUD) exchange rate was trending within the parameters of 1.3788 and 1.3883.