The Australian Dollar Euro 2017 exchange rate advanced on Monday as markets continued to buy risk-correlated currencies, even if risk appetite was dwindling. The week’s first Australian ecostats also bolstered AUD EUR demand and helped take the exchange rate almost 0.3% higher.
Australian Dollar (AUD) Benefits from Local Data
Monday’s Asian session saw the publication of a few influential Australian data publications that gave the ‘Aussie’ an early-week boost.
AiG’s Australian December construction PMI improved from 46.6 to 47 despite only being predicted to improve to 46.8. November’s Australian building permits figures jumped to 7.0% month-on-month from the previous figure of -11.8% despite only being predicted to hit 4.5%.
These figures, as well as lasting demand for risk-correlated currencies in the global market, helped the ‘Aussie’ to perform strongly at the beginning of the week, despite news that prices of iron ore (Australia’s most lucrative commodity) had begun to plunge as economists had forecast.
Prices of the commodity hit a 6-week-low from Friday to Monday and further drops are expected, but AUD continued to trend strongly regardless.
Euro (EUR) Weakened by US Dollar Strength Despite Strong Eurozone Stats
Demand for the Euro has become increasingly limited in recent weeks as concerns remain that the Eurozone bloc could be undermined by a rise in nationalist politics or weaker US-EU trade under the upcoming US Trump administration.
This has prevented the Euro from holding its ground against a strong risk-rally boosted Australian Dollar this week.
The week’s Eurozone data has been largely optimistic thus far, with German industrial production coming in at 2.2% year-on-year and Germany’s November trade surplus beating expectations.
The Eurozone unemployment rate held at 9.8% as predicted and EUR investors were impressed by Sentix’s January Eurozone investor confidence result of 18.2.
The result is thought to be a reaction to expectations of higher inflation in the US under the Trump administration, amid hopes that higher US inflation would lead to higher Eurozone inflation too.
Australian Dollar Euro 2017 Exchange Rate Forecast: Risk-Sentiment Unlikely to Last
Demand for risk-correlated currencies like the Australian Dollar is likely to fall over the next few weeks as markets will head to safer havens during the beginning of the highly uncertain US Presidency of Donald Trump.
Commodity trade is also expected to slip. Prices of iron ore have already begun to fall and analysts widely predict it will see continued falls in the coming weeks, which is sure to eventually weigh on Australian Dollar demand.
Other key downsides in the risk outlook include news that oil prices have fallen amid concerns that non-OPEC oil producing nations have begun to ramp up production to fill the gap left by the cartel’s planned production cuts.
However, the Australian Dollar could remain buoyant if upcoming domestic data continues to impress, which may hold back the relatively weak Euro.
Tuesday will see the publication of Australia’s November retail sales results, which could give the ‘Aussie’ a boost. In terms of Eurozone data, no influential stats will be published until the Eurozone industrial production report from November is published on Thursday.
AUD EUR Interbank Rate
At the time of writing, the Australian Dollar Euro 2017 exchange rate trended in the region of 0.69, while the Euro Australian Dollar exchange rate traded at around 1.43.