The Australian Dollar to Euro (AUD/EUR) exchange rate is currently trading a few percent shy of the 21 month high we saw it trading at last week. The AUD/EUR exchange rate softened in the lead up to the weekend due to falling Iron Ore pricing and continued this week trending downwards, falling by over half a percent overnight.
Overnight German inflation data in the form of the Consumer Price Index (CPI) was announced. German CPI was previously sitting at 0.1%, with the forecast being an increase to 0.3% and the result meeting expectations. The increase to the German CPI increased the European Union CPI figure from the previous deflation reading of -0.1% to the positive reading of 0.1%, causing the AUD/EUR exchange rate to fall by close to three quarter of a percent.
In a week that is fairly absent of high-tier domestic data out of Australia, much of the movement between the AUD/EUR exchange rate this week is likely to be the result of the release of Euro-Zone data. Today, New Home Sales for the month of February will be released out of the local economy, however the more significant Euro-Zone data out this evening will likely capture the focus of economists and investors.
Tonight the German Unemployment Rate is expected to remain at 6.5%, with their Unemployment Change figure forecast to reduce by 10K. Following on from the German employment data, the Euro-Zone CPI figures will be printed. The expectation is that the Euro-Zone CPI Estimate will be one of deflation, despite expecting to rise from -0.3% to -0.1% with the annualised Euro-Zone CPI Core forecast to remain at 0.7%
Australian Dollar to Euro (AUD/EUR) Exchange Rate Forecast
The AUD/EUR exchange rate appears set to remain above the 0.70 mark at least until the Reserve Bank of Australia’s (RBA) Rate Decision next week on Tuesday 7th April.
The Euro-Zone inflation figures scheduled for release this evening do not appear to provide any support for the Euro. The forecast shows that the Euro-Zone is still suffering from low inflation which continues to weigh down on the currency. On Thursday, the Australian Trade balance for February is expected to show that imports will outweigh exports, with a reading of -1275M expected.
The RBA April Rate Decision is slightly being favoured by economists to be placed on hold for a second consecutive month after being cut by 25 basis points in February. The RBA has indicated that there is the strong likelihood of a further interest rate cut in the near future, however, it is appear less likely that we will see such a cut next week. If the governing body do cut rates, we are likely to see the AUD/EUR exchange rate fall heavily to potentially trade at sub 0.70 levels once more.