As the Euro continues to struggle against fears that low yields from corporate bonds will limit the impact of the European Central Bank’s (ECB) quantitative easing programme, the AUD/EUR exchange rate is likely to hold gains initiated overnight.
In the run up to the Federal Reserve interest rate decision, the Australian Dollar to Euro (AUD/EUR) exchange rate was trending in the region of 0.6590.
Given the mounting uncertainty surrounding the UK’s EU referendum, and with commodities prices and stock values fluctuating considerably, changes in market sentiment have been the principle driver of Australian Dollar exchange rate volatility of late.
This is likely to be a continuous theme as geopolitical tensions undermine investor confidence and fickle traders become ever more reactionary to EU referendum developments.
Whilst market sentiment has overshadowed domestic ecostats to a large extent, today’s publications are considered heavyweight and should dominate trader focus.
May’s Australian Unemployment Rate is predicted to hold at 5.7%, whilst May’s Employment Change is predicted to show 15,000 newly employed.
As we draw ever closer to the UK’s EU referendum on June 23rd, traders are beginning to price in concerns that a ‘Brexit’ will have serious ramifications for the Eurozone.
There is now a great deal of risk attached to the Euro which adds to headwinds, especially if market sentiment dampens and traders flock to safe-haven assets.
The single currency is also likely to continue to struggle against low yielding developed market bonds. The drop to negative yields from German 10-year bunds highlighted the lack of confidence in the ECB’s ability to prop up the Eurozone economy.
The low yield from bonds also suggests that the ECB’s quantitative easing programme will have a muted impact, causing some analysts to speculate that policymakers will have no choice but to cut rates further in order to bring inflation in the Eurozone back to target.
As mentioned above, the principle focus for investors trading with the Australian Dollar today will be labour market data. Whilst market sentiment has potential to cause changes as the session progresses, the data results should be the main driver of ‘Aussie’ movement.
Although this week’s European economic docket is somewhat sparse compared to other major economies, there will still be some data publications later this evening with potential to cause EUR volatility. The ECB’s Economic Bulletin and the final figures for May’s Eurozone Consumer Price Index will be of interest.
In the lead up to the Federal Reserve’s interest rate decision and accompanying press conference, the Australian Dollar to Euro (AUD/EUR) exchange rate was trending within the range of 0.6543 to 0.6597.
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