Australian Dollar to Euro Exchange Rate Supported by Rising Risk-Sentiment
After weeks of losses, the Australian Dollar to Euro (AUD/EUR) exchange rate finally saw some gains towards the end of this week as markets perceived the chances of a full-blown ‘trade war’ were receding.
AUD/EUR has spent most of the week lower. After opening at the level of 0.6229 on Monday, AUD/EUR tumbled and hit its lowest level in over two years, 0.6176, on Wednesday. The pair reached above the level of 0.62 again on Thursday.
Demand for the risky Australian Dollar (AUD) has improved in the latter half of the week, rebounding from multi-year lows following weeks of poor performance.
Investors have been more eager to buy the currency back from its lows thanks to hopes that the US and China would both rather negotiate a solution to trade issues than spark a ‘trade war’.
Australian Dollar (AUD) Exchange Rate Support Bolstered by Australian Data
Thursday saw the publication of Australia’s February private sector credit results. While not a particularly influential dataset, the report did beat expectations and boost Australian Dollar demand slightly.
The month-on-month figure was forecast to come in at 0.3%. While the previous figure was revised lower from 0.3% to 0.2%, the February result rose to 0.4%. The year-on-year figure remained at 4.9%.
On top of hopes for trade discussions between the US and China, support for risky currencies like the Australian Dollar has also improved due to speculation that the isolated nation of North Korea could be gradually opening up to the possibility of denuclearisation.
Euro (EUR) Exchange Rate Strength Limited by Eurozone Inflation Uncertainties
Demand for the Euro (EUR) has been limited this week, as investors digest the reality that the European Central Bank (ECB) is still unlikely to take a more hawkish shift on tone regarding monetary policy any time soon.
Spain’s March Consumer Price Index (CPI) projection earlier in the week fell short of expectations and indicated that the Eurozone’s inflation rates were still subdued.
Hopes that the ECB could be pressured into shifting stances by more sustained inflation weakened and analysts don’t expect upcoming Eurozone inflation stats will do much to change that.
According to Ulrich Leuchtmann, FX strategist from Commerzback;
‘Frankly, the data would have to surprise to have a meaningful impact, the market basically has made up its mind about hikes, even if the data comes higher, it doesn’t mean the ECB would get more excited or hike any sooner,’
Australian Dollar to Euro (AUD/EUR) Forecast: Reserve Bank of Australia (RBA) Meeting Ahead
Australian Dollar investors are now anticipating next week’s April Reserve Bank of Australia (RBA) decision, hoping for reassurance about Australia’s economic outlook.
Recent Australian data has been mixed, and market concerns of a potential ‘trade war’ breaking out have left risky trade-correlated currencies like the ‘Aussie’ unappealing too.
The RBA is not expected to show any major shift in tone regarding Australian interest rates, but if the bank shows confidence that Australia’s economy is still gradually improving this could support the ‘Aussie’ next week.
Other Australian data due for publication includes AiG’s March PMIs and February retail sales. Of course, any developments regarding trade from the US or China, and the perceived chances of a ‘trade war’, would also influence the Australian Dollar.
Euro investors will continue to focus on the Eurozone’s inflation outlook, with the bloc’s overall inflation projection due for publication on Wednesday.
Other key Eurozone data will be published throughout the week too.
Eurozone retail sales and unemployment data, as well as Markit’s final March PMIs for the bloc, could all potentially influence the Australian Dollar to Euro (AUD/EUR) exchange rate if they surprise investors.