EUR/AUD Exchange Rate Softening amid Italian Recession
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Wednesday has seen session highs of 1.4382 versus session lows of 1.4322.
The Eurozone has seen a disappointing start to Wednesday with Gross Domestic Product (GDP) figures indicating that Italy—the Eurozone’s third largest economy—is in recession.
All eyes are now placed on Italian President Matteo Renzi to rectify this latest hitch in the Eurozone recovery after Italy has experienced two consecutive quarters of contraction. Today’s figures suggest that Italy’s growth is performing at its weakest since 2000.
Economist Franceso Daveri commented: ‘Italy is stuck in stagnation and has been stuck in stagnation for a year after eight quarters of recession. This raises the urgency for Renzi to deliver; that means that he has to deliver on the economy side and make real reforms.’
Italy’s Finance Minister Pier Carlo Padoan also commented: ‘The country must reform by itself, and we are doing it, but we must be in even more of a hurry.’
Padoan continued: ‘Italy is struggling to emerge from the crisis because it has built up structural obstacles. There are no shortcuts to get back to growth: we have to remove the obstacles with structural reform.’
However, it appears that Renzi will be enforcing elaborate tax reforms in an attempt to rebuild strength in the Italian economy.
The Australian Dollar conversely is trading lower in the currency market, following a dip in Chinese Services PMI which now hovers just on the 50.0 border; figures above 50 denote expansion whereas below 50 shows contraction.
Furthermore, Tuesday saw the Reserve Bank of Australia (RBA) maintain their current interest rate figure at 2.50%, with some speculating that rate rises could be on the horizon in early 2015.
Expert in the field Todd Elmer commented: ‘[The] RBA press release was not quite as dovish as people feared, we just had a reiteration of the comments we had last time.’
However Elmer commented that the RBA may attempt to jawbone the currency down further as it has done in recent months.
Elmer continued: ‘I doubt they’re done [talking down the Dollar], frankly it’s a low-cost strategy to try and talk down their currency. There really isn’t too much downside to the RBA doing so. The question is whether they’re prepared to do anything to back up that rhetoric, and I think the answer to that question is no.’
For now the AUD to EUR exchange rate appears to be hovering in the ‘Aussie’s’ favour as the Eurozone recovery remains fragile.
The currency pairing could see fluctuation following the Australian Performance of Construction Index, followed by Employment Change and Unemployment Rate figures on Thursday.
Meanwhile the Eurozone will publish German Industrial Production and the European Central Bank Interest Rate decision on Thursday also.
The AUD to EUR exchange rate presently resides higher at 0.6975.