Dip in Iron Ore Prices Prompt AUD/EUR Volatility
The Australian Dollar Euro (AUD/EUR) exchange rate was met by volatility at the start of this week’s session as investors reacted to a downturn in iron ore.
At the time of writing AUD/EUR is holding close to its opening levels, having traded in a range of around 0.2% through much of Monday.
Australian Dollar (AUD) Pressured by Renewed Weakness in Iron Ore
The Australian Dollar was forced to give up some ground against the Euro at the opening of this week’s session as investors reacted to the drop in iron ore prices at the end of last week’s session.
Spot prices for iron ore fell 0.85% to $74.40 a tonne on Friday, eliminating the commodity’s attempts to advance on Thursday and leaving iron ore close to a one-month low struck on earlier in the week.
The renewed weakness in iron ore was attributed to a lull in demand for Chinese steel due to decreased construction activity over the winter period.
Speaking to Reuters a steel trader in Shanghai said;
‘Snows hit more regions in China this week and physical demand has remained weak. Prices could keep fluctuating within a narrow range before spring.’
With iron ore accounting for roughly a quarter of domestic exports, the price of the commodity can have major implications for Australia’s economy and consequently the ‘Aussie’.
Euro (EUR) Slips on Germany Concerns
While the Euro started strong this week its gains proved to be fleeting as the single currency retreated again during the European session.
This fall back comes as investors become increasingly concerned about the state of politics in Germany, as the country still remains without a government even four-months after the election.
In fact political observers suggest that current coalition talks could drag on to at least April, likely meaning that the Eurozone’s largest economy will be without a government until sometime after Easter.
AUD/EUR Forecast: Aussie to Strengthen as Business Sentiment Soars?
Looking ahead the AUD/EUR exchange rate may advance on Tuesday with the publication of NAB’s latest domestic business confidence survey.
Economists forecast that the sentiment index will have jumped from 6 to 12 last month, reaching its highest levels since April.
However the ‘Aussie’s gains may prove to be short lived, with the Euro likely to jump if the Eurozone’s latest GDP figures confirm that the bloc enjoyed its best year of growth in 2017 in over a decade.