Worries among USD Traders Push AUD/EUR Exchange Rate Higher
The Australian Dollar has firmed against the Euro on Australia Day, in addition to rising by 0.8% against the Chinese Yuan and the US Dollar.
This appreciation is mainly down to a lack of confidence in future US policies, which has increased demand for riskier currencies like the Australian Dollar.
US President Donald Trump has been going against his Treasury Secretary, Steven Mnuchin, when discussing the US Dollar at the World Economic Forum in Davos.
Mnuchin has claimed that a weaker Dollar isn’t much of a concern, while Trump has praised the development of a ‘strong Dollar’.
A weak Dollar increases the odds of investment in the US and more national exports, but increases costs for importing materials to manufacture goods in the country.
This ties into Trump’s narrative about ‘trade wars’, which has unsettled USD investors and increased demand for non-USD currencies.
Uncertain Reception to TPP Deal Fails to Lower AUD Demand
On a relatively quiet week for Australian data, the main focus has been on Australia’s membership in the Trans-Pacific Partnership (TPP).
The multinational trade deal is set to go ahead after a year of renegotiations, following the US’s withdrawal in early 2017.
Economists are divided about how much the TPP will boost the Australian economy, but the general opinion is that the country will reap benefits from the deal.
Euro to Australian Dollar (EUR/AUD) Exchange Rate Remains Down despite Optimistic Inflation Outlook
While recent Eurozone news has been positive, this has failed to translate to a Euro to Australian Dollar (EUR/AUD) exchange rate rise.
Following a recent European Central Bank (ECB) policy meeting, it has been estimated that Eurozone inflation could rise by more than expected leading up to 2020.
ECB forecasts are for 1.4% inflation in 2018, 1.5% in 2019 and 1.7% in 2020, but an independent estimate upgrades these stats to 1.5%, 1.7% and 1.8% respectively.
These expectations of higher inflation are positive, as the ECB has long been trying to reach its 2% inflation rate target.
Australian Dollar to Euro Exchange Rate Forecast: AUD could Advance on Rising Business Confidence
After the recent data drought, Australian Dollar traders will be looking forward to the NAB business confidence reading, out on 30th January.
The index is predicted to show an increase from 6 points to 8, which would indicate rising business optimism during December 2017.
While the predicted increase is small, the index is considered high-impact so the Australian Dollar could appreciate on the news.
Eurozone confidence stats will also be out on 30th January, but current estimates are for mixed readings across the board.
The main indexes are for business confidence and consumer confidence; if both readings rise as forecast then the Euro could advance against the Australian Dollar.