AUD/EUR Jumps as Draghi Undermines Policy Statement
The Australian Dollar Euro (AUD/EUR) exchange rate advanced on Friday as investors shied away from the single currency following the European Central Bank’s (ECB) latest policy meeting.
At the time of writing AUD/EUR exchange rate is up almost a cent from its worse levels struck overnight on Thursday.
Euro (EUR) Pressured by Draghi Comments
The Euro found itself beating a hasty retreat early on Friday, cede all of its initial gains from the ECB’s rate decision following a speech by ECB President, Mario Draghi.
The Euro initially surged in the wake of the meeting at the ECB dropped its easing bias from its policy statement, signalling to many that it was taking steps towards normalising monetary policy.
However these gains were quickly unwound as Draghi spoke to reporters in a press conference shortly afterwards as he suggested that ECB’s policy would remain ‘reactive’ as he signalled that the bank’s inflation outlook remained subdued.
Ray Attrill, Head of FX Strategy at NAB said;
‘The ECB, as expected, tweaked their policy guidance to drop the so called easing bias, meaning a willingness to increase the size and duration of the QE asset buying programme if necessary.
‘In itself this was not market moving, but Mario Draghi succeeded in talking the Euro — and Eurozone bond yields — down in his ensuing press conference.’
Australian Dollar (AUD) Muted ahead of US Payroll data
Meanwhile the Australian Dollar remains more subdued against the majority of its other peers at the end of this week’s session as markets await the latest US payroll figures.
Analysts are forecasting that non-farm payroll growth will remain robust at 200,000 in February, with economists confident this will prompt a fall in unemployment to a new 17-year low of 4%.
An upbeat jobs report is likely to help strengthen the US Dollar on hopes that it will increase the chances of the Federal Reserve implementing up to four rate hikes this year.
In turn this is likely to drive down market risk appetite which may weigh on the Australian Dollar.
AUD/EUR Forecast: Aussie to Strengthen as Business Confidence Slides?
Looking ahead to next week’s session, the AUD/EUR exchange rate may begin to cede some of its recent gains on Tuesday as domestic business confidence is forecast to have slipped in February.
Meanwhile the political stalemate in Italy may begin to impact the Euro in the coming week as the focus on the ECB’s monetary policy fades.