Hints of Change from European Central Bank (ECB) Knocks Australian Dollar to Euro Exchange Rate
Investors bought the Euro (EUR) on Thursday following a surprisingly hawkish tone within the European Central Bank’s (ECB) latest meeting minutes. As a result, the Australian Dollar to Euro (AUD/EUR) exchange rate dropped back to near the week’s opening levels of 0.6544.
The ECB published minutes from its December monetary policy decision and investors were surprised at the report’s tone. It indicated that the bank may look to changing its language towards monetary policy in early 2018.
‘The language, pertaining to various dimension of the monetary policy stance and forward guidance could be revisited early in the coming year,
The view was widely shared that … communication would need to evolve gradually, without a change in sequencing.’
The unexpected hints at a shift in tone reflected recent strong growth in the Eurozone, despite inflation in the bloc remaining subdued. Demand for the Euro surged following the report and AUD/EUR quickly shed its recent gains.
Euro trade has also been supported in recent sessions by domestic data, which continues to indicate that the Eurozone economy grew faster than expected throughout 2017,
On top of this, the shared currency has benefitted from market hopes that German Chancellor Angela Merkel’s CDU Party is making progress towards opening formal coalition negotiations with the SPD Party.
Australian Dollar (AUD) Supported by Surprisingly Strong Retail Data
Before the European Central Bank’s meeting minutes report was published, the Australian Dollar to Euro (AUD/EUR) exchange rate was rising as traders were impressed by Australia’s latest ecostats.
Australia’s November retail sales report was forecast to slip from 0.5% to 0.4%, but instead jumped to 1.2% month-on-month.
The unexpectedly strong retail results were put down to the success of Apple’s iPhone X device, as well as strong Black Friday sales in Australia.
It marked the biggest jump in retail sales since February 2013 and was an impressive change from Q3’s weak retail performance. Analysts suspected consumers may be encouraged by the strong job market trends and low interest rates.
The data helped to make the Australian Dollar (AUD) more appealing again following concerning commodity forecasts near the beginning of the week.
Australian Dollar to Euro (AUD/EUR) Forecast: Eurozone Inflation in Focus
The Australian Dollar to Euro (AUD/EUR) exchange rate could end the week relatively closely to its opening levels, amid a lack of key data due for publication on Friday.
French and Spanish Consumer Price Index (CPI) data from December is due for publication on Friday but Euro traders are more likely to wait for next week’s German and Eurozone inflation stats before making any moves on the shared currency.
Germany’s final December inflation stats will be published on Tuesday, followed by data from the Eurozone overall on Wednesday. The Eurozone’s November trade surplus report will be published on Monday.
After the European Central Bank’s (ECB) hawkish meeting minutes report, investors will be even more eager to buy the Euro if Eurozone inflation beats expectations. However, underwhelming inflation data could lead to Euro weakness.
Australia’s economic calendar, on the other hand, is likely to be quiet until Tuesday when new motor vehicles sales will be published.
The Australian Dollar is likely to be influenced by movement in the Euro as well as risk-sentiment until next Thursday, when key Australian data including Westpac’s January consumer confidence survey and December’s job market report will be published.
Australia’s job market has seen strong performance in recent months so if the job market beats expectations again it could help the Australian Dollar to hold its ground against a sturdy Euro.