AUD EUR Recovers Slightly from Daily Lows in American Session
The AUD EUR exchange rate recovered slightly during Monday’s American session as demand for the Australian Dollar saw a slight boost from lingering risk-sentiment in markets.
While the Australian Dollar’s rival, the New Zealand Dollar, saw most of the benefit of Monday’s risk-correlated movements, the ‘Aussie’ strengthened due to underwhelming US data.
However, the Euro was able to benefit not just on speculation over Thursday’s European Central Bank (ECB) meeting, but also on Monday’s news that Eurozone inflation had met preliminary scores and improved to 0.4% year-on-year. As a result, analysts began to play up the possibility that the ECB will take a more positive tone than usual in this week’s meeting.
(Published 21:23 17/10/2016)
The AUD EUR exchange rate fell as soon as markets opened this week, slipping from the weekend’s one-year-high. While AUD EUR remained above 0.69, the Euro began to take back strength on Monday as Eurozone markets prepared for this week’s European Central Bank (ECB) meeting, while the ‘Aussie’ slipped on slightly lower risk-demand.
Australian Dollar (AUD) Slips as Risk Softens, Markets Focus on NZD
The Australian Dollar saw bullish demand last week, as the Reserve Bank of Australia (RBA) continued to indicate that the bank’s easing bias had come to an end for the foreseeable future.
Solid commodity prices and a brief dip in Federal Reserve rate hike bets bolstered global demand for risk-correlated currencies last Friday, affording the Australian Dollar a solid advance against many rivals such as the Euro.
However, demand for the ‘Aussie’ slipped on Monday as risk bullishness cooled. While further RBA news was on the way, traders who still sought out risky investments looked towards the New Zealand Dollar instead ahead of Tuesday’s key NZ inflation stats.
Euro (EUR) Demand Surges on ECB Excitement
The European Central Bank (ECB) is set to hold its October policy meeting on Thursday this week. Amid wide speculation that this week could finally see a change in stance from the bank’s policymakers investors are piling into the Euro.
Economists have speculated that the bank could be looking to hint at an end to its quantitative easing program and return to more normalised monetary policy as it questions the effects of ultra-eased measures.
AUD EUR Exchange Rate Forecast: Will RBA Statement and ECB Meeting Signal Policy Changes?
Tuesday’s Asian session could give the Australian Dollar more support if the Reserve Bank of Australia (RBA) continues to indicate that it will be leaving Australian monetary policy on hold long-term.
The central bank has stated in recent policy meetings that it has reached an end to its 2016 easing bias and would leave monetary policy frozen for the foreseeable future. This has given the already-overvalued ‘Aussie’ considerable support in recent weeks.
While there are rumours that the RBA could return to its easing bias in 2017, continued insistence from the bank that rates will remain frozen will give AUD further support.
The effects of this support will not last indefinitely and the currency will need some solid data later this week if it wants to remain near its best levels.
As mentioned, Thursday will see the ECB holding its October monetary policy meeting. If the bank hints that it could be ending its QE program, the Euro could soar. If the ECB repeats its usual, vague stance, the Euro could be undermined.
At the time of writing, the AUD EUR exchange rate trended in the region of 0.69, while the EUR AUD exchange rate traded at around 1.44.