The Australian Dollar to Euro (AUD/EUR) exchange rate remained in a tight range on Wednesday as investors digested Reserve Bank of Australia (RBA) comments and reacted to the prospect of a potential Greek default on June 5th.
There’s been little progress made in negotiations between Greece and its creditors since they began in January and the possibility of a Grexit has become more pronounced as the nation struggles to make debt repayments.
Industry expert Mike van Dulken commented: ‘In Europe this morning, indications are that, while there has been progress in negotiations, Greece will miss its June debt repayment to the IMF unless a deal is reached by the end of May.’
‘Concessions for Greece are highly unlikely – the EU will almost certainly face a second revolt in the form of Portugal’s ascendant socialists if any are afforded to Athens.’
Portugal’s general election is fast approaching and if the socialist party wins, we could witness another country attempting to renegotiate its austerity package.
By way of domestic data, the Eurozone performed disappointingly on Tuesday when the German ZEW Economic Sentiment Survey fell from 53.3 to 41.9 in May. Moreover, the German Current Situation Survey declined from 70.2 to 65.7, while the Eurozone Economic Sentiment Survey tumbled from 64.8 to 61.2.
Meanwhile, the Reserve Bank of Australia released meeting minutes this week which showed the central bank adopting a dovish bias. It’s possible that the RBA will cut interest rates in the near future as the ‘Aussie’ Dollar remains resiliently high.
HSBC economists have suggested that the RBA has few tools left at its disposal to bring down the Australian Dollar – with only jawboning and interest rate adjustments to deploy.
RBA Deputy Governor Philip Lowe stated: ‘In Australia, the monetary easing in the rest of the world has meant our currency has been higher and we have responded to that by having lower interest rates than we otherwise would have had.’
The Australian Dollar to Euro (AUD/EUR) exchange rate could be in for an interesting day of trading on Thursday with the release of Australian Consumer Expectation and Eurozone Consumer Confidence data. Additionally, the European Central Bank will release its account of its monetary policy meeting which could also cause some moderate EUR movement.
The Australian Dollar to Euro (AUD/EUR) exchange rate is currently trending in the region of 0.7106.
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