- EUR AUD Slides as Debt Crisis Flares up Again – IMF makes renewed call for Greek debt relief.
- Euro Weakened by German Data – Industrial Production unexpectedly plummets.
- RBA Keeps Rates Unchanged – Australian Dollar rises as Bank releases upbeat growth outlook.
The Euro Australian Dollar (EUR AUD) exchange rate slumped this morning as the threat of the Greek debt crisis flared up once again.
Greek Debt Crisis Softens Euro Australian Dollar (EUR AUD)
The Euro came under renewed pressure over the state of the Greek economy this morning as the International Monetary Fund (IMF) made further calls for its European partners to provide fresh debt relief to the beleaguered nation.
However, debt talks have been stalled in recent months as the Greek government is in a deadlock with the European Stability Mechanise (ESM) over the implementation of further austerity, something that Prime Minister Alexis Tsipras is vehemently opposed to.
The likelihood of further debt relief from Germany, Greece’s largest contributor, is unlikely ahead of national elections later this year, with the German government being strongly against discussions until the Greek government reaches its bailout targets.
The IMF has also ruled itself out of committing further funds to Greece as well however. According to the Financial Times;
‘By labelling Greece’s public debt unsustainable it has also made its own financial contribution to a bailout impossible under its own rules.’
Markets are becoming increasingly fearful that if European leaders are unable to come to an agreement over Greece then the nation may be left to crash out of the union in a so-called ‘Grexit’, a possibility that could have far wider implications for the single currency than Britain’s vote to leave the EU last year.
Australian Dollar Rises as RBA Outlook Upbeat
The Australian Dollar rallied last night following the Reserve Bank of Australia’s (RBA) latest policy meeting.
While the RBA voted to leave its interest rates unchanged at 1.5%, something that had been widely expected by investors, it indicated that further rate cuts were unlikely as it painted a more positive outlook for future growth in Australia, saying;
‘A return to reasonable growth is expected in the December quarter, the Bank’s central scenario remains for economic growth to be around 3% over the next couple of years.’
This was welcome news for traders, who were shocked by the 0.5% contraction in GDP during the third quarter of 2016.
EUR Weakened by German Industrial Production
Euro sentiment was also dampened this morning by a surprise drop in German Industrial Production at the end of 2016.
Figures show that German production plummeted from 0.5% to -3.0% in December, performing significantly worse than the 0.2% drop predicted and reaching an eight-year low.
Output was pressured by a decline in both manufacturing and construction, although Andreas Rees, chief German economist at UniCredit in Frankfurt was quick to point out that the fundamentals remain strong and the lack of workdays over the holiday period was likely the cause behind the drop.
EUR AUD Exchange Rate Forecast: German Trade Balance Ahead
The EUR AUD exchange rate may extend its losses tomorrow with the release of Germany’s latest Trade Balance data as analysts predict that the trade surplus will slip from €22.6bn to €20.5bn in December.
Meanwhile Australia will release its latest New Home Sales figures, with the ‘Aussie’ likely to strengthen further if sales in December improve over the 6.1% rise recorded the month before.
Current Interbank Exchange Rates
At the time of writing the EUR AUD exchange rate was trending around 1.40 and the AUD EUR exchange rate was trending around 0.71.