The Australian Dollar to Euro (AUD/EUR) exchange rate fell by approximately half of one percent overnight after trading around the highest level it has been since June 2013, following on from the first week of the European Central Bank’s (ECB) 1.1 trillion Euro bond buying program proving to devalue to Euro.
The ‘Aussie’ (AUD) commenced its’ recent rally against the Euro (EUR) last week during the roll out of the Euro-Zone’s Quantitative Easing (QE) program. The AUD/EUR exchange rate lift was supported later in the week when the Australian Unemployment Rate dropped unexpectedly from 6.4% to 6.3%, with an additional 15.6K jobs being added to the economy for the month of February.
Yesterday the AUD/EUR exchange rate remained relatively stable during the Australian trading session with only minor domestic data being released in the form of New Motor Vehicle Sales. Volatility between the currency pairing increased overnight following the ECB announcing that they had spent 10B Euros in the first week of their Quantitative Easing (QE) purchases.
Today the Reserve Bank of Australia (RBA) will release the Minutes of their March Meeting. With interest rates being placed on hold earlier this month, economists and investors will pay close attention to the reasons why the governing body decided to keep interest rates at 2.25% this month and the likelihood of the RBA cutting interest rates further in the coming months. The AUD/EUR exchange rate is likely to soften from the 20 month highs if the RBA Minutes allude to further interest rate cuts in the near future.
Australian Dollar to Euro (AUD/EUR) Exchange Rate Forecast
The AUD/EUR exchange rate is likely to remain volatile in the short-term as the quantitative easing continues throughout the Euro-Zone. The forecast is that the QE will place continued downward pressure on the Euro, providing the opportunity for the AUD/EUR exchange rate to push north toward a 2 year high.
On the other side of the fence, the Australian Dollar (AUD) has been undergoing a period of devaluation against most currencies due to the recent interest rate cut by the RBA and the prospect of another cut to follow later this year. At this stage it appears as though the AUD/EUR exchange rate is engaged in a race to devalue; with the current victor being the Euro.
The upcoming Rate Decision by the Reserve Bank of Australia (RBA) next month, and the market’s reaction to the ongoing QE in the Euro-Zone, will both play key roles in determining the trend of the AUD/EUR exchange rate.