The Euro to AUD exchange rate began the week in a softer position as investors focused on European Central Bank President Mario Draghi’s recent cautionary comments.
Over the weekend Draghi all but confirmed that the European Central Bank will be taking policy action in June.
Draghi implied that deflation concerns may need to be countered by ‘pre-emptive action’.
During a conference in Portugal Draghi stated; ‘Our responsibility is nonetheless to be alert to the risks to this scenario that might emerge and prepared for action if they do. What we need to be particularly watchful for at the moment is, in my view, the potential for a negative spiral to take hold between low inflation, falling inflation expectations and credit, in particular in stressed countries.’
These comments followed last week’s disappointing Eurozone construction output figures and below forecast German business confidence surveys.
The ECB’s next policy meeting is fast approaching, and if the central bank deploys additional stimulus the Euro’s present weakness could persist for some time to come.
As it stands there is some debate as to what policy action might be taken.
While introducing an interest rate cut or negative deposit rate are possibilities, the central bank might also bring in a new bond buying programme – or even some combination of these three options.
The uncertainty is pressuring the Euro and inspiring its bearish relationship with peers like the ‘Aussie’.
The Euro also began the week trending lower against the Pound, US Dollar and New Zealand Dollar.
According to forex expert Thomas Averill; ‘I’m fairly bearish on the Euro. The ECB is, certainly from the rhetoric perspective, leaning towards easing.’
Meanwhile, the Australian Dollar was holding steady despite the domestic ANZ-Roy Morgan consumer confidence index sliding by 1.1 per cent.
The sentiment measure has dropped by 15 per cent over the last five weeks, with this latest dive driven by Australia’s comparatively harsh budget.
Yesterday national holidays in the UK and US limited currency market movement and the Euro was little changed after the German GfK consumer confidence survey came in at 8.5 in June, unchanged from May and in line with expectations.
A lack of economic data for the Eurozone may limit further Euro to Australian Dollar fluctuations today, but investors will also be looking ahead to tomorrow’s influential reports, including China’s leading index, Australia’s Westpac leading index/construction work done report and German unemployment figures.
Over the week ahead other data to focus on includes Australia’s new home sales number and German retail sales figures.
Unless this week’s Eurozone news delivers a notable surprise to the upside, the Euro may well continue trading in a weaker position against the Australian Dollar.
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,1.3648,
Euro,,British Pound,0.8088,
Euro,,Australian Dollar,1.4729,
Euro,,New Zealand Dollar,1.5947,
Euro,,Canadian Dollar,1.4793,
[/table]
