After the European Central Bank (ECB) delivered a particularly dovish policy statement the Australian Dollar to Euro (AUD/EUR) exchange rate surged, jumping by 1.7% on the day’s opening levels.
The Euro began the day trending in a narrow range against many of its most traded peers, with traders reluctant to invest in the common currency ahead of the ECB’s interest rate announcement.
The AUD/EUR exchange rate had previously fallen to a low of 0.6332 however as Australia’s Conference Board Leading Index came in at -0.4%. While the Westpac Leading Index did improve from -0.3% to 0.1% on the month in September, the institution’s medium term outlook for economic growth in the region remains below trend.
Westpac economist Bill Evans observed; ‘Over the last six months the six month annualised growth rate in the Leading Index has slowed from being 0.16% above trend to 0.35% below trend. […] The minutes from the October Board meeting emphasised that the Bank is comfortable with the outlook for the labour market and the apparent slowing in the housing market. It will take some time to assess the size and impact on the economy of any tightening in financial conditions that might be associated with independent increases in mortgage rates from banks’.
However, the Australian Dollar to Euro (AUD/EUR) exchange rate went on to stage an impressive rebound during the European session.
While the ECB left fiscal policy unchanged, the policy statement offered up by President Mario Draghi was decidedly dovish in tone. It had been expected that the central bank chief would attempt to jawbone the Euro lower in an attempt to make the Eurozone more competitive, but his commentary was negative enough to still have an impact on the common currency.
Draghi stated; ‘The degree of monetary-policy accommodation will need to be reviewed at our December meeting when new macroeconomic projections will be available. We want to be vigilant, as people used to say in the old times. […] Today, things have changed. That doesn’t necessarily imply that we are going to use this instrument. The discussion was wide open.’
The Euro dropped by over 1.5% against a number of its rivals after the announcement and the AUD/EUR currency pair surged.
The Australian Dollar to Euro (AUD/EUR) exchange rate could experience volatility during the Australasian session as China publishes property price figures and its Conference Board Leading Index. Any negative figures for China could refuel slowdown concerns and see the ‘Aussie’ give up some of its recent gains against the Euro.
The Australian Dollar to Euro (AUD/EUR) exchange rate is currently trending in the region of 0.6472
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