The EUR to AUD exchange rate was slightly higher as the market continued the recent trend of an improving European economy but this trend may come under threat after markets panicked on Monday that the Coronavirus was spreading outside of China.
The Aussie economy has been under pressure lately after fears over the Coronavirus effects on the Chinese economy. The EUR v AUD was trading at 1.6400 but this could slip if markets see a threat to the European economy.
Will Coronavirus Spread Threaten Europe’s Economy?
Global stock markets were nursing heavy losses on Monday after fears grew over the spread of the Coronavirus outside of China. Italy has been one of the problem spots and this could be problematic for the European economy and its currency.
Gold prices were trading at a seven year high as traders sought a safe haven from stocks. This trend could also see gains in the Australian dollar if investors feel that the virus spread was a threat to Europe’s economy. Recent economic data from the Eurozone had given traders hope that the trading bloc had seen the worst of its growth slump and led to gains in the EUR v AUD last week.
The Coronavirus has now seen 1200 cases in thirty different countries with six deaths in Italy confirmed. After a recent march to record highs in the ASX 200, the Aussie stock index is down over 3% but similar losses are being seen in European and U.S. stocks. A spokesperson for the World Health Organization warned on Friday that the window to contain the virus was “narrowing”. Currency markets will be on alert this week to see if the virus can be contained or if some re-pricing of economies is needed.
European Data Will Drive the Short-Term Movement This Week
Tomorrow sees the release of Europe’s fourth quarter German Gross Domestic Product. GDP economic growth is one of the most watched data releases and markets are expecting the economy in German to have stagnated for the fourth quarter at 0.3%. A better-than-expected number would see some strength in the euro currency.
The following day will see the ECB President talking at an event in Germany so some clarification may be given on the potential effects of the virus on Europe’s economy.
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