Damp Market Sentiment Weighs on AUD/EUR Exchange Rate


Two Euros (EUR)

In response to disappointing data out of China over the weekend, market sentiment dampened considerably. This weighed heavily on demand for high-yielding assets such as the ‘Aussie’ (AUD).

Recent AUD Gains Retract, has ‘Aussie’ Rally Faded?

Over the past few weeks the Australian Dollar has made robust gains versus most of its major peers. This was due to a combination of cooling bets regarding Federal Reserve rate hikes and extensive stimulus measures employed by the People’s Bank of China (PBoC).

However, Monday has seen a reversal for AUD after data out of China exaggerated fears regarding a global economic slowdown. Both Industrial Production and Retail Sales failed to meet with the respective market consensuses.

Some analysts believe that the AUD rally was the result of tracking gains in iron ore prices, expecting the rally to fade as base metal prices resume depreciation. ‘This is a smoke and mirrors rally’ in the Australian dollar, said Annette Beacher, head of Asia-Pacific research at TD Securities in Singapore. ‘The Aussie is merely following iron ore, and the underlying fundamentals have not changed. The short-squeeze in iron ore will fade, and then so will the Aussie.’

The Australian Dollar to Euro (AUD/EUR) exchange rate was trending in the region of 0.6754 during Monday’s European session.

EUR/AUD Climbs but Euro Comparatively Weak on USD Strength

Although the single currency is holding gains versus the Australian Dollar, the Euro is still holding losses versus most of its major peers. The depreciation can be linked to US Dollar strength thanks to safe-haven demand.

The European Central Bank’s (ECB) extensive stimulus measures introduced last week continue to weigh on demand for the common asset, as was the intention. In particular, the expansion of asset purchases is projected to have a long-term detrimental impact on the value of the Euro.

Domestic data printed positively during Monday’s European session but the result had minimal impact on the shared currency. January’s Eurozone Industrial Production was predicted to advance by 1.6% annually and 1.7% on the month, but the results actually grew by 2.8% and 2.1% respectively.

In response to the industrial output data, Howard Archer, chief European and UK economist at IHS Global Insight warned that output gains could be temporary, stating; ‘It needs to be borne in mind that output can be highly volatile from month to month. Consequently, there is a very real possibility that February will see a marked relapse.’

During Monday’s European session, the Australian Dollar to Euro (AUD/EUR) exchange rate dropped to a low of 0.6746.

AUD/EUR Exchange Rate Forecast: RBA Minutes in Focus

The AUD/EUR exchange rate is likely to see volatility during the Australasian session in response to the publication of meeting minutes from the Reserve Bank of Australia (RBA). The minutes are expected to be dovish in tone given repeated calls for AUD devaluation and attempted jawboning of late.

During Tuesday’s European session, fourth-quarter Eurozone Employment data has the potential to cause AUD/EUR volatility.

The Australian Dollar to Euro (AUD/EUR) exchange rate climbed to a high of 0.6800 during Monday’s European session.

About

Ollie relocated to Cornwall after obtaining his degree from Portsmouth University. He works with one of the UK’s largest currency brokers, studying the currency market and writing up-to-the-minute updates on market movements for a variety of publications, both in print and online. - View all posts by Ollie Carpenter


« Previous Story

AUD/EUR Dives after Draghi Hints at No Further Rate Cuts

Next Story »

Australian Dollar (AUD) Slumps against Euro (EUR) on Fed Rate Speculation


Disclaimer: Currency-Converter.com.au and its data provider, TorFX, make no claims regarding the validity or exactness of the information provided in on this site and will not be held liable for any use, interpretation, or other implementation of the information provided. Currency-converter.com.au make no warranties, express or implied, as to results to be obtained from use of such information, and make no express or implied warranties of condition, quality, performance, merchantability or fitness for a particular purpose or use. Currency-converter.com.au shall not have any liability for the accuracy of the information contained in the services provided or ommissions there in which are made available on a free, as-is basis. None of the aforementioned parties shall be liable for any third party claims or losses of any nature, including, but not limited to, lost profits, punitive, consequential, special, incidental, indirect or similar damages even if advised of the possibility of such damages. Rates offered are interbank rates and may not be the same as offered by your financial institution, and do not include commissions. Rates shown on this site will vary from those provided by TorFX or other providers linked to from this site.