The Australian Dollar to Euro (AUD/EUR) exchange rate softened in Wednesday’s European session after several influential events took place.
Firstly, the Reserve Bank of Australia released its Financial Stability Review and discussed the very real threat of an overheated housing market. After recently cutting interest rates by 0.25% to bring the benchmark to 2.25%, economists were forecasting another cut in the near future.
However, the central bank suggested it wanted to view the effect the initial decrease had created before cutting again.
The RBA stated: ‘Prices have continued to rise at a national level, driven in particular by investors’ search for yield in the global environment of low interest rates and ample liquidity, with the lower Australian Dollar also likely to be adding some impetus to foreign demand.’
‘The risk of a large repricing and associated market dislocation in the commercial property sector has increased.’
Meanwhile, the Euro has been trending higher this week, spurred by upbeat German data.
Wednesday’s IFO German Climate ecostat rose from 106.8 to 107.9 in March; forecasts had suggested that a smaller increase to 107.3 would take place. Additionally, the German IFO Expectations figure jumped from 102.5 to 103.9. The Current Assessment number rose in line with forecasts from 111.3 to 112.0.
Economist Thomas Gitzel stated: ‘The general conditions for the German economy are favourable. Companies are confident about the future due to a weak Euro, low interest rates and the robust economy.’
The Australian Dollar to Euro (AUD/EUR) exchange rate could experience hefty movement on Thursday with the release of German GfK Consumer Confidence. European Central Bank (ECB) President Mario Draghi is also expected to speak in Thursday’s European session and could cause major Euro movement.
With little Australian data out in the rest of the week, the Australian Dollar to Euro (AUD/EUR) exchange rate will be largely dependent on global developments for movement.
The Australian Dollar to Euro (AUD/EUR) exchange rate resides at 0.7180. The Euro to Australian Dollar (EUR/AUD) exchange rate is trending in the region of 1.3930.
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