AUD EUR Ends Week Near One-Month-Lows
Risk-aversion in markets prompted investors to sell the Australian Dollar last week, and a lack of strong Australian data gave investors little reason to buy it again.
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AUD EUR began the week trending at 0.6734 and due to risk-off movement and underwhelming Australian data the pair hit a one-month-low of 0.6662 on Friday.
Australian Dollar (AUD) Pressured by Risk-Off Movement
For the latter half of the past week, markets have been reacting to rising geopolitical tensions between the US and North Korea.
With both nations ramping up rhetoric and occasionally threatening the possibility of military action, foreign exchange traders have been opting to avoid risk-correlated investments in favour of traditional ‘safe havens’.
This has impacted the risky Australian Dollar, and investors have had little other reason to buy the ‘Aussie’ either, leading to some losses for the currency.
Recent Australian confidence surveys have been mixed. The most recent business confidence report was up, but Westpac’s August consumer confidence survey was down.
August’s consumer inflation expectations survey also slipped, from 4.4% to 4.2%. This indicated that Australian citizens expect inflation to slow, weighing on hawkish hopes that inflation will improve.
On top of this, Australia’s June home loans results came in at 0.5%, well short of the 1.5% forecast.
Euro (EUR) Sturdy on Solid Inflation Results
The Euro’s outlook hasn’t really changed notably over the last week.
Analysts still expect the shared currency has more gains ahead of it in the long-term, with markets increasingly confident that the European Central Bank (ECB) will begin to unwind its quantitative easing (QE) package soon.
This has helped the Euro to hold its ground and advance against the weaker Australian Dollar.
Investors were generally unfazed by Friday’s final July Consumer Price Index (CPI) results from Germany, France, Spain and Italy.
All the key inflation figures met projections, meaning there were no pleasant (or unpleasant) surprises for EUR traders. German inflation had improved from 1.6% to 1.7% year-on-year in July.
AUD EUR Forecast: Key Eurozone Growth Projection Ahead
Euro trade is more likely to be influenced by domestic data next week, as Q2’s key Eurozone Gross Domestic Product (GDP) projections will be published throughout the week.
German growth projections will come in on Tuesday, followed by Italian and overall Eurozone estimates on Wednesday.
Other key Eurozone data to take note of includes France’s Q2 unemployment rate, and the Eurozone’s final July inflation results, making next week a potentially big one for Euro trade.
However, if the Australian Dollar remains weak, the Euro may not weaken much even if data disappoints.
Geopolitical tensions could remain in focus, potentially limiting demand for risky currencies like the ‘Aussie’.
Next week will also see the publication of the Reserve Bank of Australia’s (RBA) latest meeting minutes and July job market results. If these reports disappoint, AUD EUR is unlikely to recover.
On the other hand, if geopolitical tensions cool and Australian data impresses, AUD EUR could see a jump in demand and recover much of the last week’s losses.
AUD EUR Interbank Rate
At the time of writing this article, the AUD EUR exchange rate trended in the region of 0.6680. The Euro to Australian Dollar exchange rate traded at around 1.4970.