Rising Optimism from NAB Economists Triggers AUD/EUR Exchange Rate Rise
The Australian Dollar to Euro exchange rate has risen on 16th February, thanks to a positive prediction for AU economic growth from National Australia Bank (NAB).
NAB analysts have upgraded their growth forecasts for the national economy in 2018, stating;
‘We are forecasting economic growth of 2.9% in 2018 and 2.8% in 2019 in annual average terms, suggesting an economy which manages to grow slightly above potential.
Tepid consumer spending amidst low and only gradually rising wages growth however tempers the outlook, and is a key uncertainty for monetary policy’.
NAB analysts gave more detail on expectations for the Reserve Bank of Australia (RBA), stating;
‘If unemployment continues to drift lower and wages gradually higher as anticipated, we believe the RBA will have enough confidence that inflation will eventually pick up towards the bottom of the band.
Acting in anticipation of this would be appropriate and we forecast two 25bp interest rate hikes in August and November, although we acknowledge the risks are that these hikes could be delayed’.
The RBA last raised Australian interest rates back in November 2010, so predictions for long-awaited rate hikes this year have been well-received by AUD traders.
Euro to Australian Dollar Exchange Rate Drops despite German Price Growth
While the Euro has lost ground to the Australian Dollar (EUR/AUD) today, the single currency has otherwise advanced thanks to German wholesale price growth.
During January, year-on-year and month-on-month sales have reportedly risen by 0.9% and 2% respectively.
These strong postings have raised confidence among Euro traders, who are considering the possibility of overall Eurozone inflation rising.
In turn, this would boost the odds of the European Central Bank (ECB) considering tighter monetary policy, ideally leading to an increase in the central bank’s interest rates.
Australian Dollar to Euro Exchange Rate Forecast: AUD/EUR Advance possible on RBA Meeting Minutes
The Australian Dollar could rise further against the Euro during the coming week, specifically when the Reserve Bank of Australia (RBA) releases its minutes on 20th February.
The minutes will cover the RBA’s monetary policy meeting from earlier in the month, at which bank policymakers left interest rates at 1.5%.
While the minutes will be a few weeks old, they could still trigger an AUD/EUR exchange rate rally if they suggest that interest rate hikes could be on the horizon.
Next week will also see a measure of Australian construction activity released on 21st February – this is forecast to show a considerable slowdown during Q4 2018.
Reduced construction activity has negative implications for future Australian GDP and housing data, so a slowing reading could lead to AUD/EUR exchange rate losses.
The coming week’s biggest Eurozone news will be confidence readings out on 20th February, along with manufacturing activity stats on 21st February.
If Eurozone confidence and PMI activity readings both decline as forecast, the Euro could progressively decline against the Australian Dollar next week.