The Australian Dollar Euro exchange rate looks to sustain notable gains this week, thanks to strong Australian job market data and a cautious tone from the European Central Bank (ECB).
AUD EUR began the week trending at the level of 0.6382 and spent most of the week rising. On Friday, the pair hit a one-month-high of 0.6524 but slipped slightly from its best levels before markets closed.
Australian Dollar (AUD) Rally Slows after Strong Week
Demand for the Australian Dollar has been strong for most of the week due to domestic Australian data and higher market demand for risk-correlated currencies. The Australian Dollar’s gains slowed on Friday.
The most notable Australian data was Thursday’s Australian job market report from November.
Australia’s participation rate had unexpectedly jumped from 65.2% to 65.5%, even though the unemployment rate remained at 5.4%. This was due to an impressive employment change result of 61.6k.
Analysts praised the report and noted that overall, Australia’s job market had performed impressively throughout 2017. Investors are hoping that as unemployment drops, domestic wage growth will eventually improve.
The risky Australian Dollar also benefitted from weakness in the US Dollar (USD) throughout the week, due to disappointment at the lack of hawkishness from the Federal Reserve.
Euro (EUR) Pressured by European Central Bank (ECB) Cautiousness
Euro investors generally overlooked the past week’s Eurozone data, as the shared currency has already benefitted considerably in recent months from the Eurozone’s strong economic outlook.
Markets were more interested to see if the European Central Bank (ECB) had become more hawkish towards monetary policy, but the bank’s Thursday policy decision was familiarly cautious.
ECB President Mario Draghi indicated he believed that Eurozone inflation would remain below the bank’s 2.0% target until at least 2020.
This cautious stance on inflation dampened market hopes for the bank to take a hawkish stance on Eurozone interest rates any time soon. Many analysts even speculated the bank could extend its stimulus measures in 2018.
This made it easier for AUD EUR to advance on Thursday and end the week near highs.
Australian Dollar Euro Forecast: Eurozone Inflation Results Ahead
Australia’s economic calendar will be slightly quieter next week. The Reserve Bank of Australia’s (RBA) latest meeting minutes will be published on Tuesday and the Westpac leading index update will come in on Wednesday.
Besides that, the Australian Dollar Euro exchange rate is more likely to react to shifts in risk-sentiment or the strength of the Euro.
Perhaps the most influential report next week will be the Eurozone’s final November Consumer Price Index (CPI) results, which come in during Monday’s European session.
If Eurozone inflation beats expectations, AUD EUR could shed some of its recent gains as markets will hope for better-than-expected Eurozone inflation in 2018.
Other Eurozone data to keep an eye on throughout next week includes Ifo’s German business confidence results and Eurozone consumer confidence projections for December.
AUD EUR Interbank Rate
At the time of writing this article, the Australian Dollar Euro exchange rate trended in the region of 0.6500. The Euro to Australian Dollar exchange rate traded at around 1.5385.