The Australian Dollar to Euro (AUD/EUR) exchange rate declined by -1.47% on Thursday after the Euro rallied across the board.
The Euro remained resilient despite Moody’s warning that the possibility of a Grexit was rising. The announcement came just a day after Moody’s cut Greece’s bond rating to Caa2 from Caa1 with a ‘negative’ outlook. Moody’s also suggested that the overall outlook for the nation, economically, financially and politically is ‘slanted to the downside.’
Moody’s stated: ‘The Greek government and its official creditors remain far apart on key objectives, with no immediate prospect of agreement being reached on a new finance package. The outcome of these decisions is highly uncertain and the potential for a policy accident resulting in Greece defaulting on its marketable debt, including that held by the ECB, has risen.’
The situation in Greece has caused the Euro to become extremely volatile in recent months and negotiations appear to have been pretty fruitless. The Greek government recently made a change to its team of negotiators in an attempt to spur progress. However, Moody’s still believes the risk of a ‘Grexit’ is rising.
Moody’s stated: ‘Moody’s expects Greece (Caa2, negative outlook) to reach an agreement with its creditors and avoid default. However, lack of progress so far means the probability of a default, and of exit, is rising.’
The Eurozone produced a mixed bag of data on Thursday, beginning with German Retail Sales figures which rose from 3.3% to 3.5% in March on the year. However, the monthly reading contracted by -2.3%, despite economists forecasting 0.5% growth.
Germany’s Unemployment Change came in at -8K in April rather than the -15K predicted, but was enough to see the German Unemployment Change stay at 6.4% in April on the year.
The Eurozone Unemployment Rate printed at 11.3% later in the session instead of declining to 11.2% in line with forecasts.
The Australian Dollar could be in for a rally against other majors next week if the Reserve Bank of Australia (RBA) makes the decision to keep interest rates on hold. Many economists have suggested that the central bank could make a downward adjustment to interest rates in the near future to curb the strong ‘Aussie’ exchange rate and deflate the buoyant Sydney housing market.
Friday will see the release of the Australian AiG Performance of Manufacturing Index which could offer the Australian Dollar moderate movement.
The Euro to Australian Dollar (EUR/AUD) exchange rate is trading at 1.4134. The Australian Dollar to Euro is trending in the region of 0.7076.
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