Australian Dollar Continues its Downward Path Against the Euro as Markets Try to Shake Off Recent Panic

AUD GBP Boosted but a Busy Week of Data Begins

The AUD v EUR exchange rate was trading lower again with a drop of over 1.50% for the second-consecutive day. The European Central Bank’s decision to leave rates unchanged has been a catalyst for further gains in the European single currency.

The AUD to EUR pair was trading at 0.5550 and the Australian currency has been under pressure since the Coronavirus outbreak began.

Euro Strength Continues to Ignore Virus Spread

Traders are continuing to ignore the potential implications of the virus spread in Europe. Australia’s currency has been beaten down because of the knock-on effects that China’s virus problems will have on Australia’s economy, but the European economy was in worse shape ahead of the outbreaks.

China seems to have stabilized the virus situation with only 22 new cases overnight and this is much lower than the 1,188 in Spain. European countries hold the number two to eight positions in the list of new cases in the last 24 hours, so the threat is seemingly more to Europe than Australia. This dynamic could cause a real re-pricing of currency rate expectations if it continues to worsen.
Traders have been fixated on whether the ECB or Aussie Reserve Bank will cut interest rates further but a 0.10% to the ECB’s 0.5% deposit rate is largely irrelevant if they have to shut down other countries like they did in Italy.

German consumer prices hold steady to boost the Euro

The only data today was a German consumer price inflation reading that came in as expected at 1.7%. Again, this is a lagging indicator because many people could see consumers spending more due to the panic buying being driven by the virus. It’s important for investors to see the bigger picture right now.

The next key figure for the AUD v EUR currency pair will be the release of Australian jobs numbers on Thursday. Unemployment has been a key drive of the RBA’s recent policy actions and will have a bearing on whether the bank cuts rate, or how much it cuts, so this will be a closely-watched figure.

The Australian currency is struggling to find supporters right now but this may be a value opportunity if the virus spread continues in European economies.

If you would like to know more on factors influencing AUDGBP exchange rates, feel free to contact myself, Joseph Wright, using the form below.