Euro Edges Higher Versus the Australian Dollar but Coronavirus Spread is a Headwind for Gains

AUD GBP on the Retreat with BoE Rate Meeting Due

The EUR v AUD exchange rate was slightly higher as the market continued with the recent trend of an improving European economy however the spread of the Coronavirus is restricting the potential for further gains.

The Australian dollar has been under pressure lately over fears that the Coronavirus could hit growth in the Chinese economy and the exports of Australian businesses. The EUR v AUD was trading near 1.6450 but the pair is now approaching the stubborn resistance of 1.6580 that saw a recent sell-off. Markets will be keeping an eye on the Coronavirus spread into Europe as this could be a headwind that changes the course of the recent trend.

Coronavirus Spread Continues to Threaten Europe

Global stock markets were trying to bounce after yesterday’s heavy losses saw the key indices falling around 4%. Yesterday saw a spread of the Coronavirus into Northern Italy and reports today are that a hotel in Tenerife, Spain was on lockdown with fears of infection among its hundreds of guests.

The recent squeeze higher in the European economy and its currency could reverse if the virus threatens the supply chains of Europe. Northern Italy is home to much of the wealth in the country and the Lombardy region, whose capital is Milan, has been on quarantine. The region is known for being a financial and manufacturing hub.

A spread into a key area of the struggling Italian economy and into the tourist hotspots of Spain has been seeing safe haven flows from Europe into U.S. dollars. This has yet to translate into Aussie support due to the China issue, but this trend could reverse if the situation gets worse in Europe.

German GDP Comes in as Expected with Lagarde Speech on Deck

Germany’s Gross Domestic Product for the fourth quarter came in as expected at 0.3% and this provided support for the Euro as traders took the optimistic route over the virus spread.
Tomorrow brings a speech by the European Central Bank President Christine Lagarde. Central bank speeches tend to be lacking in fireworks because they are aware of the market-moving potential of their comments. Despite this, Lagarde’s speech could bring some clarity over the Coronavirus threat and the bank’s response to any continued selling in stocks.

If you would like to learn on factors influencing AUD/EUR exchange rates for an upcoming currency transfer, feel free to contact myself, Royston Howell, using the form below.