Forecasts for Frozen Interest Rates Leave AUD/EUR Exchange Rate Close
The Australian Dollar has traded in a narrow range against the Euro today, due to uncertainty about when the next Australian interest rate hike could be.
While a number of economists believe the Reserve Bank of Australia (RBA) could raise interest rates in 2018, not everyone has been so optimistic.
Among those against the idea of higher rates has been Capital Economics Australia and New Zealand Chief Economist Paul Dales, who says;
‘We don’t think the [interest rate] trigger will be pulled at all this year.
Our view is the overall economy will do okay this year and grow by around 2.5% and inflation will remain below the RBA’s 2%-3% target range’.
Likewise, Craig James of Commsec has been similarly cautious in his forecasts, stating;
‘The RBA is in no rush to change rates in any direction.
Despite the economy approaching its sustainable ‘speed limit’, inflation is expected to drift higher towards 2.5% over 2018 but globalisation will continue to cap the growth of prices’.
If there are signs of the RBA staying inactive with its monetary policy decisions this year, the Australian Dollar could make sustained losses against the Euro.
Euro to Australian Dollar Exchange Rate Tight as Tension Builds for German Coalition Talks
The Euro has been flat against the Australian Dollar (EUR/AUD) today, ahead of a crucial vote in German coalition discussions.
The latest update has been positive, with the largest union group in Germany approving in-depth talks between the SPD party and the CDU/CSU union.
Summing up the opinion of all eight trade unions in the group, DGB Chairman Reiner Hoffmann said;
‘We have reviewed the results of the exploratory talks and there is much substance there for workers in Germany’.
Along the same lines, CSU leader Horst Seehofer has declared that;
‘I can only appeal to everybody to get their act together and enable the formation of a government. Anything else would be disastrous for Germany’.
The next big test for the talks will be on 21st January, when SPD members vote on whether unity discussions should continue.
The hope is that the SPD’s factions will approve further negotiations for the greater good, as the alternative could send shockwaves throughout Germany.
Australian Dollar to Euro Forecast: Rising AU Consumer Confidence could Boost AUD Demand
The first notable economic news from Australia next week will be out on the morning of 23rd January.
This will be the ANZ-Roy Morgan weekly consumer confidence index, which previously rose to a four-year high.
If the reading prints higher then the Australian Dollar could rally against the Euro, as it would suggest a strong start to Australia’s economic year.
Euro traders will also be waiting until 23rd January for the next Eurozone data, which will consist of ZEW surveys of economic confidence.
During January, estimates are for rising confidence across the board in Germany and the Eurozone.
Such results could greatly increase confidence in the Euro, leading to major gains against the Australian Dollar.