AUD/EUR Forecast: Falling Crude Prices Dampen Sentiment

Euros (EUR)

With market trade returning to risk-off mode, the Australian Dollar to Euro (AUD/EUR) exchange rate softened by around -0.7% overnight and is expected to hold weakness this morning ahead of Fed Chief Janet Yellen’s speech.

Australian Dollar (AUD) Exchange Rate Forecast to Decline despite Complete Absence of Data

During yesterday’s Australasian session the ‘Aussie’ (AUD) declined versus a number of its major peers in response to less-than-ideal domestic data. March’s AiG Performance of Construction Index dropped from 46.1 to 45.2 which shows that construction output fell further into contraction territory.

Early this morning Federal Reserve Chairwoman Janet Yellen is due to speak alongside several Fed officials. If Yellen reiterates the need to be very cautious with regards to tightening policy, the resultant US Dollar losses may provoke ‘Aussie’ gains.

With crude oil prices showing little sign of a swift recovery, however, there is a high chance that market sentiment will remain damp. This will likely reduce the appeal of the ‘Aussie’.

With a complete absence of domestic data to provoke changes, Australian Dollar movement will be subject to changes in market sentiment and commodities prices.

Euro (EUR) Exchange Rate Forecast to Struggle on ECB Easing Speculation

During Thursday’s European session the common currency declined versus many of its major rivals following dovish comments from European Central Bank (ECB) Chief Economist Peter Praet. Flagging concerns regarding external risks and deflationary pressures from falling commodities, Praet argued that the ECB has more room to ease policy if necessary.

Further adding downwards pressure was the publication of minutes from the most recent ECB policy meeting. The minutes showed that most policymakers were united on the massive stimulus package rolled out last month.

This afternoon is likely to see Euro volatility in response to German Trade Balance data which is predicted to show that the surplus rose from 13.2 billion to 18 billion in February.

AUD/EUR Exchange Rate Forecast: Risk Appetite to Dictate Trade

As mentioned above, the absence of Australian economic data today should allow the ‘Aussie’ to move in response to market sentiment. US Dollar movement and commodity prices will also be likely to play a hand in Australian Dollar movement today.

Also detailed above, the Euro may see changes in response to German Trade Balance data. However, US Dollar movement and any comments from ECB officials will likely be far more impactful than domestic data.

Over the past seven days, the Australian Dollar to Euro (AUD/EUR) exchange rate was trending within the range of 0.6600 to 0.6761.


Ollie relocated to Cornwall after obtaining his degree from Portsmouth University. He works with one of the UK’s largest currency brokers, studying the currency market and writing up-to-the-minute updates on market movements for a variety of publications, both in print and online. - View all posts by Ollie Carpenter

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