The Australian Dollar to Euro (AUD/EUR) exchange rate remained in a narrow range on Tuesday as Greek negotiations continued and investors digested the recent People’s Bank of China (PBoC) interest rate cut.
The week began with Australian Dollar weakening as China is Australia’s largest trading partner and therefore any developments in the region can have a domino effect on the Trans Tasman currency.
Industry expert Zhang Chen commented on the 25 basis point adjustment, saying: ‘The timing of the rate cut is well within expectations while the depth of the cut is smaller than many had expected.’
However, a potential slowdown in Chinese economic growth could cause major weakening for the ‘Aussie’ as there’s likely to be lesser demand for Australia’s largest export, iron ore.
Meanwhile, Australian domestic data has been relatively thin on the ground this week, leaving the AUD/EUR exchange rate to fluctuate under the influence of Eurozone domestic data and global developments.
Tuesday saw Greece make its International Monetary Fund (IMF) loan repayment, which reduced Grexit fears but edged the nation closer to financial collapse. At present, Greece owes €320 billion in debt, €240 billon of which is for the European bailout it received. Greece owes another €56 billion to currency bloc powerhouse, Germany.
BNPP commented: ‘With Greece having paid the EUR 0.75bn payment that was due, focus is now on a deal being struck before the end of the month. We expect that a decline of Greece’s cash balances should encourage a deal by this time.’
Greece’s future is extremely uncertain with many economists now suggesting the nation could run out of funds in the near future and accidentally leave the Eurozone.
The Australian Dollar to Euro (AUD/EUR) exchange rate could fluctuate in Wednesday’s session with the release of Australian Wage Cost Indexes and Chinese data.
Chinese Industrial Production figures could have an impact on the Australian Dollar and a fall in production may see the price of iron ore decline.
The Australian Dollar to Euro (AUD/EUR) exchange rate is trading at 0.7084. The Euro to Australian Dollar (EUR/AUD) exchange rate is trending in the region of 1.4122.
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