Australian Dollar Advances against Euro on Fresh Catalonia Political Uncertainty
Following days of declines, the Australian Dollar to Euro (AUD/EUR) exchange rate put in a strong recovery on Thursday night amid the results of Catalonia’s 2017 parliamentary elections.
Catalonia, an autonomous region in Spain, voted to once again give a majority to the three parties that supported Catalonian independence earlier in 2017.
In a blow to Spain’s government, the result created fresh uncertainty in Catalonia that the nation may continue to push for independence from Spain – though it is not known if ousted leader Carles Puigdemont will be able to return to Catalonia.
The Euro (EUR) saw strong performance for most of the week due to optimism about the Eurozone’s economic outlook. However, the Catalonia election news made it easy for AUD/EUR to recover to the week’s opening levels.
Australian Dollar (AUD) Exchange Rates Supported by Risk-Sentiment
Despite a lack of strong Australian data over the past week, heightened risk appetite made the Australian Dollar (AUD) more appealing towards the end of the week.
Demand for risk-correlated currencies was stronger following the latest US growth and Personal Consumption Expenditure (PCE) reports, both of which fell short of expectations and lowered Federal Reserve rate hike bets.
This helped the AUD/EUR exchange rate to capitalise on the Euro’s politically-influenced weakness. The pair advanced from 0.64 to over 0.65 during Thursday’s Asian session.
Prices of Australia’s most lucrative commodity, iron ore, also rose on Friday, supporting Australian Dollar exchange rates.
Eurozone Data Limits Australian Dollar to Euro (AUD/EUR) Exchange Rate Losses
The Euro was pressured by political concerns on Friday, but the AUD/EUR exchange rate’s gains slowed due to the publication of more strong data from the Eurozone.
GfK’s German consumer confidence survey for January rose from 10.7 to 10.8 as expected, while Italy’s December consumer confidence stats beat expectations with a result of 116.6.
On top of this, France’s final Q3 Gross Domestic Product (GDP) report beat projections of 0.5% quarter-on-quarter, remaining at 0.6% instead.
AUD/EUR Exchange Rate Forecast: German Inflation Stats in Focus
The Euro is more likely to drive Australian Dollar to Euro exchange rate movement in the coming week, but market activity is forecast to be quieter overall amid the holiday period.
Key Consumer Price Index (CPI) projections from Spain and Germany will be published next Friday, the final trade day of 2017.
German inflation is forecast to have slowed from 1.8% to 1.5% year-on-year in December. If inflation beats expectations it could boost Euro demand amid speculation that the European Central Bank (ECB) could become more hawkish.
Australia’s economic calendar will be comparatively quiet, but November’s private sector credit and HIA new home sales stats next Friday could influence the Australian Dollar to Euro exchange rate slightly.