The Australian Dollar to Euro (AUD/EUR) exchange rate is trending within a tight range on Wednesday afternoon.
After having strengthened on rising gold prices, the ‘Aussie’ (AUD) pared gains on Wednesday after gold prices halted ahead of the Federal Open Market Committee minutes. The shared currency, meanwhile, softened against the majority of its most traded rivals after domestic data disappointed.
The Australian Dollar to Euro (AUD/EUR) exchange rate is currently trending in the region of 0.6808.
As explained above, after gold prices halted gains the ‘Aussie’ (AUD) softened. With oil prices falling below $50 a barrel, market sentiment is waning considerably. The high-yielding qualities of the Australian Dollar, therefore, are less attractive during risk aversion trading.
‘Some consolidation at this point is understandable,’ UBS said. ‘Caution may be warranted here as a few risk events are in store for the market this week.’
‘The ADP number is another indication that the economy is growing,’ Phil Streible, a senior commodity broker at R.J. O’Brien & Associates in Chicago, said in a telephone interview. ‘The market is nervous ahead of the Fed minutes, and the text will indicate how hawkish the Fed members are.’
A positive result from the Performance of Service Index, which increased from 43.8 to 47.5, wasn’t enough to pare the ‘Aussie’ declination.
The Australian Dollar to Euro (AUD/EUR) exchange rate dropped to a low today of 0.6786.
Although German labour market data printed positively, the majority of Wednesday’s European data produced negative results. Of particular disappointment was the Eurozone Consumer Price Index Estimate which declined from 0.3% to -0.2%.
‘If inflation remains low for a long time, people might expect prices to fall even further and postpone their spending,’ ECB President Mario Draghi warned in a newspaper interview published last week. ‘We are not there yet. But we need to tackle this risk.’
Some traders are less concerned, however, as Jens Weidmen explains; ‘For me, a few months of inflation rates below zero does not constitute deflation. That would require a self-perpetuating downward spiral of negative inflation rates, GDP declines and wage declines. This risk remains minimal.’
Australian Dollar to Euro (AUD/EUR) Exchange Rate Forecast to Hold Steady
With a complete lack of domestic data to curb the trend, the Australian Dollar to Euro (AUD/EUR) exchange rate is likely to continue trending within a narrow range for the remainder of Wednesday.
The Australian Dollar to Euro (AUD/EUR) exchange rate reached a high today of 0.6828.
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