Australian Dollar to Euro Exchange Rate Trends near Multi-Year Lows on Persistent Trade Uncertainties
Despite a brief jump during Monday’s Asian session, the Australian Dollar to Euro (AUD/EUR) touched a new low during the European session as market concerns about the US trade outlook continued to weigh heavily on risk-sentiment.
Last week saw AUD/EUR tumble from the week’s opening level of 0.6275 to 0.6229. Despite briefly climbing above 0.6250 on Monday, the pair hit a low of 0.6220 overnight. This marked the lowest level for AUD/EUR in over two years, since September 2015.
Some early week hopes that the US would be able to come to an agreement with China over strict trade tariff plans did not do much to support Australian Dollar (AUD) trade.
Investors remain concerned that if the US Presidential administration remains strict on plans to put tariffs on US imports, it could spark a global trade war.
Tariffs aimed at China last week only worsened these concerns, as China quickly retaliated with its own plans for tariffs.
Reports emerged over the weekend that the two nations were in talks to avoid a potential trade war from breaking out, but unless there are optimistic developments investors have had little reason to buy risky currencies like the Australian Dollar.
Australian Dollar (AUD) Exchange Rates Knocked by Weaker Iron Ore
Prices of iron ore, Australia’s most lucrative commodity, have slumped to multi-month lows in recent sessions. According to analysts, the main cause for the losses were the US trade tariffs on imports of Chinese steel.
The plunge in iron ore futures and prices left the iron ore correlated Australian Dollar a lot less appealing overall during Monday’s session.
As a result, the Australian Dollar was unable to benefit from hopes that the US and China were in talks over trade.
According to Zhou Tao, analyst from Citic Futures;
‘The prospects of trade war between US and China has driven a systematic selloff in commodities,
The market is in panic.’
Euro (EUR) Exchange Rate Gains Limited by Underwhelming Eurozone Data
While the Euro (EUR) edged higher against the Australian Dollar during Monday’s European session, the shared currency’s gains were limited.
Investors have had little reason to buy the Euro over the past week. The currency remains relatively close to highs following months of strong performance since last year, so recent Eurozone data has proven disappointing.
Last Thursday saw the publication of the Eurozone’s March PMI projections from Markit, which fell short of expectations in almost all major prints.
The Eurozone’s overall manufacturing PMI projection slipped from 58.6 to 56.6, services fell from 56.2 to 55.0, and the composite figure tumbled from 57.1 to 55.3, missing the forecast figure of 56.7.
It followed disappointing Eurozone economic confidence data earlier in the week, influenced by concerns that the US could spark a ‘trade war’.
Australian Dollar to Euro (AUD/EUR) Forecast: US Trade Developments and German Inflation in Focus
Amid a lack of major Australian ecostats due for publication in the coming days, the Australian Dollar to Euro (AUD/EUR) exchange rate is more likely to be influenced by Eurozone data as well as of course any developments in US trade news.
Any signs that potential trade talks between the US and China are advancing or seeing success would likely make the Australian Dollar more appealing as investors would be less averse to buying risky currencies.
This may also help prices of iron ore recover following recent losses.
However, if the nations ramp up protectionist rhetoric or issue stronger tariffs against each other, the Australian Dollar will remain weak and AUD/EUR may even tumble to new multi-year lows.
Euro investors, on the other hand, are likely to focus on upcoming Consumer Price Index (CPI) results from various Eurozone nations.
Tuesday will see the publication of Spain’s March inflation projections, followed by Germany’s on Thursday, and lastly inflation projections from France and Italy on Friday.
The most influential will be Germany’s. If German inflation comes in higher than forecast it is likely to boost market speculation that the European Central Bank (ECB) could be pressured into tightening Eurozone monetary policy sooner than expected.