The Australian Dollar Euro (AUD EUR) exchange rate rocketed higher overnight on Wednesday following a marked rise in risk appetite ahead of the Federal Reserve’s latest rate decision.
Investor Flock to Australian Dollar (AUD) in Advance of Fed Meeting
The Australia Dollar shot higher during the European session on Wednesday as investor risk appetite soared ahead of the FOMC’s December rate decision.
With a rate hike from the Fed being all but certain its impact has largely been priced in by markets, leading investors to rush into high-yield markets in order to make some quick profit.
Markets are also betting on the Australia Dollar to strengthen even further in the wake of the Fed rate decision as well, with economists forecasting that a dovish outlook from the central bank will lead to a dip in the US Dollar (USD).
Analysts from RBC Capital Markets said;
‘The bigger question is whether the Fed will significantly alter their economic and rates projections. We think not and believe it is more likely the committee will seek flexibility on this front and wait until March to make significant upgrades.’
Also supporting the jump in the ‘Aussie’ was another surge in iron ore as spot prices for benchmark 62% fines rocketed up by 3.5% to $71.25 a tonne by the start of Wednesday’s session, leaving the commodity just shy of the three-month high of $72.68 it struck last week.
Meanwhile the Euro’s losses on Wednesday were slowed slightly by the release of the Eurozone’s latest industrial production figures as factory output rose by 0.2% in October, beating expectations it would have remained flat after previously slumping by 0.5% in September.
AUD EUR Forecast: ‘Aussie’ Gains to be extended by Domestic Labour Report?
Looking ahead the AUD EUR exchange rate may be propelled even higher on Thursday will the publications of Australia’s latest labour report, with economists forecasting that the employment will have rebounded in November.
Meanwhile the Euro may attempt to rally during the European session on Thursday on the back of the Eurozone’s latest PMI figure, although the single currency may find its gains trimmed later in the day if the European Central Bank (ECB) remains dovish in its latest policy meeting.
Current Exchange Rates
At the time of writing the AUD EUR exchange rate was trending around 0.6469 and the EUR AUD exchange rate was trending around 1.5462.