Australian Dollar Gains a Cent on EUR and USD in a Week

Euro weakness expected ahead of anticipated frail economic data

The Australian dollar has seen a mixed reaction against most of its major currency counterparts recently. The AUD to GBP exchange rate remains stable trading in the 0.55 mid-market level whilst the antipodean currency has fared better against the euro and the US dollar. AUD to EUR has gained almost a cent since the same time last week whilst AUDUSD gained just more than a cent in a week but has remained stagnant since the weekend with no movement so far today.

Chinese-Australian Political Relations Break Down

Surprisingly, it comes at a time where you would not expect the Australian dollar to be making significant inroads against other currencies as the geo-political dispute between Australia and China takes another turn for the worse. It comes following the detaining of Australian citizen Cheng Lei who is a high-profile host for CGTN broadcasting after concerns for China’s national security. An identical story emerged last month with two Australian news reports came close to being detained by Chinese authorities over national security threats again and were swiftly flown back home.

The problems started back at the start of the year though when investigations into the initiation of COVID-19 were being probed by Australia had China retaliate with threats about boycotting the importing of red meat and wine – two of Australia’s biggest exports. Unsurprisingly, this was also brought on out of concern for national security as China seems to try and keep its political cards close to their chest.

The ongoing uncertainty this provides is unlikely to be supportive of the Australian dollar and is remarkable that the plucky commodity currency has been doing so well against the euro and US dollar. There is potential that this could be more to do with the recent announcements that Australia and its neighbour New Zealand have opened up an air corridor allowing travel between the two countries as coronavirus infection rates have dropped off for both countries. This is very welcoming news as many countries globally are struggling with new COVID-19 cases which has had damaging ramifications for their economies. In Australia’s case, the additional revenue from New Zealand-backed tourism will be a positive indicator for things to come.

Economic Data: Employment to Drop by 50,000

In other news, there will not be any market releases until Wednesday where we will see the Reserve Bank of Australia (RBA) governor Philip Lowe speech giving an insight into the economic forecast and market sentiment. Depending on the nature and tone of this speech, there could be some currency volatility.

Thursday will bring the employment and unemployment releases. The first release, Employment change, is expected to lose 50k jobs following the 110k gain last month despite the Unemployment release predicted to drop by 0.4% from 6.8% to 6.4%. There is potential that the positives and the negatives of these announcements may reduce any market movement here.

Next week will bring the RBA meeting minutes on Tuesday with retail sales figures on Wednesday. Predictions are not out yet, but the last recording was -4% so anything to pull sales figures out of contraction may be taken positively and see further AUD inroads. Get in touch using the form below to discuss these factors and their potential impact on your upcoming currency exchange.