Euro Edges Higher Against the Aussie but the Downtrend May Continue

AUD GBP on the Retreat with BoE Rate Meeting Due

The EUR v AUD exchange rate yesterday was trading 0.11% higher. The market had rallied as high as 1.6230 but failed to hang on to the gains. The pair bounced off the high from Thursday and a failure to get above that level could see the recent downtrend continue for the euro.

Eurozone ZEW Sentiment Survey Disappoints

The Eurozone’s ZEW Economic Sentiment Survey slipped again in February after two months of gains. December saw a figure of 11, with January improving to 25.6, so traders were hoping that the optimism amongst business leaders would continue. Prior to the December figure, the ZEW survey had been in negative territory for a number of months as the Brexit gloom cast a shadow over businesses’ ability to plan or invest. The latest figure is a slight disappointment to the euro bulls.

The next figures on the economic calendar for the EUR v AUD exchange rate are Thursday’s employment numbers from Australia and the release of notes from the ECB’s January meeting. The Australian job numbers become more important because the RBA’s Governor Philip Lowe has already stated that the bank will only consider additional monetary stimulus if the employment picture sours. This would have a negative effect on the Aussie if Thursday’s numbers disappoint.

Reserve Bank Minutes Underline Recent Statements

As was expected, the Reserve Bank of Australia’s February Minutes did not provide any surprises to the market. Governor Lowe has been talking on various platforms recently, in order to reassure markets over the recent bushfires and the Chinese virus situation, so traders have a good grasp on the Australian dollar forecast.

The RBA members considered lowering the interest rate below the current 0.75% figure but felt the risks outweighed any of the benefits. As noted, the bank also said that further stimulus would only be necessary if employment suffered. Their case was helped by stronger employment in the weeks that followed and the employment release on Thursday will bring this back into focus.

If the Aussie economy can build on recent jobs strength, the Australian dollar is likely to continue strengthening versus the euro as the threat of further stimulus measures is removed. The 1.6000 level was where the EUR v AUD traded before the euro rallied over the bushfire fears and this would be the target for further Aussie strength.

For more information on AUD exchange rates for an upcoming currency transfer, you can email me, James Lovick, using the form below.