Australian Dollar to Euro (AUD/EUR) Exchange Rate Forecast: ‘Aussie’ Drops, ECB Details QE

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One Australian Dollar (AUD)

The Australian Dollar to Euro (AUD/EUR) exchange rate fell during Thursday’s European session as the ‘Aussie’ shed losses from the recent Reserve Bank of Australia (RBA) interest rate announcement.

The Australian Dollar exchange rate had initially rallied on the news that the RBA would be keeping interest rates stable at 2.25%, rather than making another cut as some economists had forecast.

In addition, Reserve Bank of Australia Deputy Governor Philip Lowe remarked that the Australian Dollar is overvalued—an event that’s been relatively frequent in recent months as the ‘Aussie’ exchange rate remains stubbornly high.

Lowe stated: ‘The scale of global monetary stimulus means that our exchange rate remains relatively high given the state of our overall economy. The end result here is that global developments have left us with a higher exchange rate and lower interest rates than would otherwise been the case. We may not like this configuration, but developments abroad give us little choice.’

Meanwhile, the Euro softened as the European Central Bank (ECB) gave a press conference and announced it was cutting inflation forecasts. The ECB suggested prices would be flat at 0.0% in 2015, a reduction from the previous 0.7% prediction.

However, a silver lining came when the central bank forecast a jump in 2016 inflation of 1.5% rather than the initial 1.3% forecast. Furthermore, ECB projections expect 2017 inflation growth to reach 1.8%.

ECB President Mario Draghi did warn that the Eurozone’s economic recovery would be ‘dampened’ by balance sheet changes as well as a more lethargic pace of reforms.

Draghi also announced that quantitative easing would begin on March 9th and is named the Public Sector Purchase Programme (PSPP). However, Draghi’s statements came under fire from some industry experts.

One group of analysts stated: ‘Regarding the programmes duration, Draghi made no effort to clarify the two possible endpoints he had suggested in January: either September 2016 as a fixed date or once a sustained adjustment in the path of inflation is underway.’

‘The frequent use of “credit”, “recovery” and “unemployment” in his opening remarks today might suggest Draghi’s sense of urgency has not ebbed away since January. If sustained, this could eventually translate into a more flexible handling of the duration of the purchasing programme.’

Australian Dollar to Euro (AUD/EUR) Exchange Rate Forecast

The Australian Dollar to Euro (AUD/EUR) exchange rate could be in for fluctuations in Friday’s session with the release of German Industrial Production and Eurozone Gross Domestic Product (GDP) stats.

In addition, the Australian AiG Performance of Construction Index will also emerge.

The Australian Dollar to Euro (AUD/EUR) exchange rate is trading at 0.7056. The Euro to Australian Dollar (EUR/AUD) exchange rate is trending in the region of 1.4178.

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