Australian Dollar to Euro (AUD/EUR) Exchange Rate Forecast: Single Currency on Uptrend amid Risk Aversion

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Euros (EUR)

The Australian Dollar (AUD) has returned to bearish form at the beginning of the week as domestic business confidence declines and the latest stock market rally runs out of steam.

ECB Dovishness Boosted AUD/EUR Exchange Rate to Two-Week High

After hitting a four-month low of 0.6237 in the midst of last week’s commodity sell-off the Australian Dollar to Euro (AUD/EUR) exchange rate began to recover some of its strength ahead of the weekend. European Central Bank (ECB) President Mario Draghi helped to talk down the Euro (EUR) by once again reiterating the willingness of policymakers to loosen monetary policy should inflationary pressure within the Eurozone remain weak. While pundits had shown some scepticism towards the central bank’s ability to deliver on this dovishness the single currency nevertheless slumped against rivals.

Demand for the ‘Aussie’ (AUD), meanwhile, was shored up as stock markets made efforts to claw back losses at the end of a turbulent week. Risk appetite rose in response to a strong rally in oil prices, which broke back above $30 and continued to strengthen during Friday’s European session. Consequently the AUD/EUR pairing trended higher to a two-week best of 0.6508.

Euro (EUR) Trends Higher despite Disappointing German Economic Sentiment Survey, ‘Aussie’ (AUD) Softened by Market Volatility

Market optimism has, however, faded somewhat at the start of the new week to push the antipodean currency back onto a downtrend. The NAB Business Confidence Index was found to have declined from 5 to 3 in December, another demonstration of the negative impact that the current global slowdown is having on sentiment in the Australian economy that has given pundits little reason to favour the commodity-correlated currency.

Safe-haven demand has helped to shore up the Euro afresh, in spite of the latest German ZEW Economic Sentiment Surveys falling short of forecast. Confidence in the Eurozone’s powerhouse economy has weakened further at the start of 2016, as negative global headwinds drag on the outlook of German businesses.

AUD/EUR Exchange Rate Forecast: Higher Australian Inflation Predicted to Boost ‘Aussie’

Later in the week the Australian Dollar may rally more strongly with the release of the fourth quarter Australian Consumer Price Index data, as inflation is forecast to have shown a minor uptick on the year from 1.5% to 1.6%. Stronger inflationary pressure is likely to deter the Reserve Bank of Australia (RBA) from lowering interest rates in the near-term, a prospect which is expected to boost the appeal of the ‘Aussie’.

Current AUD, EUR Exchange Rates

At the time of writing, the Australian Dollar to Euro (AUD/EUR) exchange rate was slumped in the region of 0.6461, while the Euro to Australian Dollar (EUR/AUD) pairing was making strong gains around 1.5470.

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