Drop in Risk-Sentiment Sees Australian Dollar to Euro Exchange Rate Fall
The Australian Dollar to Euro exchange rate slumped last week on struggling commodity prices and falling faith in the US economic outlook. The pair fell from 0.71 to 0.70 over the course of the five days.
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When markets opened on Monday, AUD EUR fell further as investor confidence in the US economic outlook continued fading. Growing uncertainty in the world’s biggest economy left risky currencies like the Australian Dollar highly unappealing.
On Friday evening, US President Donald Trump’s ‘American Healthcare Act’ (AHCA) plan was pulled before going to Congress vote, as Trump and House Speaker Paul Ryan perceived a lack of support for the bill from fellow Republicans.
Without support, the bill would be unable to pass through Congress, despite Republicans having a majority in both the House and the Senate.
The AHCA failure left analysts and markets increasingly doubtful that the Trump would find enough support for his previously proposed US fiscal policy plans either.
Hopes for US fiscal policy changes from US President Trump had been among the primary reasons for the increased confidence in the US economy in recent months.
This confidence quickly unravelling has led to traders pouring out of riskier currencies like the Australian Dollar in favour of comparatively safe purchases, like the Euro.
Other factors weighing on the Australian Dollar in the past week included a lack of supportive domestic data, as well as news that prices of iron ore, Australia’s most lucrative commodity, had seen their worst losses of 2017 so far.
The Euro, on the other hand, has benefitted notably over the last week from fading Eurozone political concerns and strong economic indicators from the currency bloc.
Over the weekend, new 2017 French election polls saw pro-EU centrist Presidential candidate Emmanuel Macron take the lead with 26% of the first round vote – ahead of anti-EU Marine Le Pen’s 25% share of the first round vote.
The same poll shows Macron enjoying a 62% lead in the second round, against Le Pen’s 38%. Concerns still remain that Le Pen could perform much better than expected, however.
As for EU data, Friday saw the publication of the Eurozone’s preliminary March PMIs from Markit – which came in above expectations in all major prints. The Euro bloc’s composite PMI rose from 56 to 56.7 despite analysts predicting a fall to 55.8.
The combination of a sturdier political outlook and economic outlook in the Eurozone made it easy for the Euro to capitalise on the risk-off movement that has seen the ‘Aussie’ dip over the last week.
At the time of writing this article, the Australian Dollar to Euro exchange rate trended in the region of 0.70. The Euro to Australian Dollar exchange rate traded at around 1.42.