Eurozone Data Disappointed and Helped the Australian Dollar to Euro Exchange Rate Recover
Despite a lack of supportive Australian news or data in recent sessions, the Australian Dollar to Euro (AUD/EUR) exchange rate rebounded from its worst weekly levels on Thursday afternoon.
AUD/EUR opened this week at the level of 0.6382 and after touching a three-week-high of 0.6406 on Tuesday the pair slipped. During Friday’s Asian session AUD/EUR touched a weekly low of 0.6349 but trended a third of a cent higher during the European session.
Australian Dollar (AUD) demand has been weighed down in recent sessions by lower market demand for risk-correlated currencies, but weak Eurozone data helped AUD/EUR to recover on Thursday.
Thursday’s Eurozone data included business confidence data from France and Germany, as well as inflation stats from France and Italy.
Germany’s February business confidence survey figures from Ifo all fell short of expectations. Current conditions slipped to 126.3, expectations to 105.4 and the key business climate results to 115.4.
France’s business confidence and inflation figures fell short of expectations too, as did Italy’s January inflation results.
Overall though, investors remained confident about the Eurozone’s economic outlook. This has helped the Euro (EUR) to avoid major losses against the Australian Dollar. According to Victoria Clarke from Investec;
’The Euro area economy has been picking up for awhile now and it’s got to a point where expectations are for solid growth; but perhaps there aren’t as many surprises in the data anymore,’
Australian Dollar (AUD) Exchange Rates Rebound Despite Fed Rate Hike Bets
The Australian Dollar rebounded from weekly lows on Thursday, despite a lack of supportive news for the currency.
Wednesday’s Australian wage growth results were mixed, indicating that most private worker wages were generally still slow, and the Q4 construction work report came in at a concerning -19.4%.
Not to mention that during Wednesday’s American session the Federal Reserve took a more hawkish tone, causing bets that US interest rates could rise at least three times throughout 2018.
Typically these things would weigh on the Australian Dollar, but as the ‘Aussie’ has recently hit lows and neared key support levels, investors are hesitant to continue selling the currency.
Analysts have speculated that generally strong commodity prices have helped the Australian Dollar to avoid further losses.
Euro (EUR) Exchange Rates Little Changed Following European Central Bank (ECB) Minutes
Thursday also saw the publication of the European Central Bank’s (ECB) latest meeting minutes results, which generally had little impact at all on the Euro outlook.
The bank’s meeting minutes signalled that it was still too early to change the tone of monetary policy forward guidance, despite gradually rising confidence in Eurozone inflation.
‘I couldn’t see anything that was out of line with what we’d expected (in the ECB minutes),
Given that they’ve been mentioning it in the opening statements of the press conferences, which is a rare phenomenon, it should be no surprise for markets that the ECB is concerned about the exchange rate.’
Australian Dollar to Euro (AUD/EUR) Forecast to React to Eurozone Inflation Results
As Australia’s economic calendar will be quieter in the coming sessions, the Australian Dollar to Euro (AUD/EUR) exchange rate will be influenced largely by Eurozone news.
However, due to major support levels below the Australian Dollar, AUD/EUR losses may be limited even if the Euro sees stronger demand.
Friday will see the publication of key Eurozone ecostats, including Germany’s final Q4 Gross Domestic Product (GDP) results, as well as the Eurozone’s final January Consumer Price Index (CPI) figures.
Eurozone inflation could be the most influential dataset of the week if it surprises, as it could influence European Central Bank (ECB) tightening bets.
The bloc’s inflation rate is forecast to have contracted at -0.9% month-on-month and have slowed to 1.3% year-on-year, but core inflation is expected to have risen slightly to 1.0%.
If the figures beat expectations, AUD/EUR could end the week lower. Weaker than expected Eurozone inflation would make it easier for AUD/EUR to sustain gains this week though.