The euro to Australian dollar exchange rate has been falling heavily and consistently over the last few days to a month-low of 1.734 with some political and economic disruptions being the main cause for the Euro weakness. Of late, the Financial Times have recently released predictions that Spain’s Gross Domestic Product (GDP) data could drop by a staggering 15.5% by the end of the year. As one of the worst hit countries both in Europe and globally, with 150k cases and 15,000 deaths, the financial sector is running at very low capacity and has resulted in total debt to GDP exceeding 120%.
Alongside this, the Eurozone has been anticipated for unemployment to surpass 15% with member countries of the Bloc resorting to a complete lockdown last month. Further analysts support claims of a mass economic downturn as Rabobank released predictions that should the lockdown end by the 1st June, the Eurozone could contract by 5.2%. Whilst that would be a dire situation for EU economies already struggling like Greece, with a debt to GDP ratio of 181%, Rabobank furthered their projections that if the lockdown continues until 1st August, GDP contraction could breach 12%.
With such depressing predictions for the Eurozone, consumer confidence in the euro will have declined significantly as Europe has been bearing the brunt of COVID-19 recently and in comparison, their Australian counterparts have only lightly be affected by the pandemic showing just how much of this rate change can be attributed to the uncertainty the virus brings.
Australia and Eurozone see an increase in data releases in the back end of next week with Westpac Consumer Confidence on Wednesday with the all-important unemployment rate change on Thursday which should add clarity, or at least the extent to which the Coronavirus is hampering the Antipodean economy with a comparatively small 6,000 cases and 51 deaths. Europe will see Harmonized Consumer Price Index on Thursday with the International Monetary Fund (IMF) meeting on Friday to discuss stabilising global economic retraction and methods to re-stimulate economies. This should be watched closely by investors as this could provide some detailed insight into what can be expected in the next few weeks and months to come.
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