The euro to Australian dollar rate movements have been slightly more consistent than other currency pairings amidst the Coronavirus pandemic. At the back end of last month, mid-market levels were dropping at a consistent rate from a height of 1.89 down to 1.70 three weeks later. Despite the euro having lost almost 20 cents against the AUD, there hasn’t been the massive rising and failing of rates in significant undulations like with have seen in many other major currency pairs like the EURUSD for instance.
At present, mid-market resides at 1.71 which has plateaued over the last few days. Further developments from the Coronavirus or data releases will be needed to stimulate the economy for further market movements. Speaking of which, today the Eurozone will receive several reports on the Consumer Price Index which will give some evaluation into the extent of consumer spending and the costs of living which is expected to come in with levels far below 50 (anything less than 50 is considered negative) as unemployment is looking to rise into double digits with COVID-19, whilst tapering off in cases, still very much having a serious impact on Europe’s livelihood.
Bloomberg reports have predicted that the lockdowns governments have introduced around the world to mitigate the spread of the virus have equated to a global economic loss of $5bn dollars. Specific to the single currency, European Central Bank Vice President Luis de Guindos has stated that Europe is likely to experience a more severe recession than the rest of the world and any economic positivity derived from 2021 will not be enough to cover the shortfall created this year. This statement comes after the growing general consensus that the Eurozone has not reacted fast enough or with the required strength of counter-measures to help soften the blow the virus has caused on both the economy and its citizens. Take the emergency funding package as an example. €500 billion is set to be distributed in countries in most desperate need of aid but this is 1/4th of Donald Trump’s US package of $2.2tn and is still being discussed and further meetings needed before it can be fully implemented.
On Australia’s latest developments, next week will see the Reserve Bank of Australia’s (RBA) latest Meeting Minutes from the last two weeks giving a full account of policy debates following the interest rate decision near-on two weeks ago where the rates were left unchanged. This will be subsequently following by RBA Governor Philip Lowe’s accompanying speech which may well come in a likely hawkish approach to the currency markets. Clients holding or looking to invest in the Australian Dollar should watch this release carefully as this could reveal which direction the Australian government may take to best shield itself from the Coronavirus.
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