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Australian Dollar to Euro Exchange Rate Falters Following Geopolitical Unrest

Australian Dollar to Euro exchange rate graph

The Australian Dollar to Euro (AUD/EUR) exchange rate is currently trending in the region of 0.6918, fluctuating between a low of 0.6913 and a high of 0.6928. Movement is around 0.10% at the time of writing.

Last week saw traders flock to safe haven currencies as escalating geopolitical tension weakened the riskier commodity and emerging market currencies. This was further demonstrated on Friday as sentiment towards the ‘Aussie’ (AUD) fell following US President Barack Obama’s announcement of his approval of the use of air strikes in Iraq.

Prior to the US President’s announcement, Friday would have been a good day for the ‘Aussie’. China, being Australia’s biggest trade partner, posted encouraging results regarding trade balance and exports which would have bolstered the Australian Dollar ordinarily.

The Euro softened over the last week, not helped by the European Central Bank’s (ECB) decision to maintain the interest rate at 0.15% on Thursday. Friday saw little change in the fortune of the Euro after the German trade balance data posted a figure of 15.0 billion which was significantly less than the forecast figure of 18.5 billion. The single currency was little improved by good German export and import figures, which saw a rise to 0.9 % to 0.8% forecast for the former, and a rise of 4.5% from 1.0% for the latter.

The situation in Russia is likely to affect the pairing in the coming weeks. As described above, any geopolitical unrest heightens demand for safe haven currencies such as the Japanese Yen (JPY), and dampens sentiment towards any of the riskier commodity currencies such as the ‘Aussie’. The decision to ban Western food imports into Russia will have a marked affect on the Euro. Particularly affected are European agricultural exports as stated by Heinz-Christian Strache, Chairman of the right-wing Freedom Party of Austria; ‘In just a few days after the [Russian] sanctions came into force they hurt out agriculture. The EU is thinking on how to mitigate it. Instead of putting Russia on its knees, they drag our farmers to ruin with their senseless sanctions policy’.

There is no data due for release today for either currency in the AUD/EUR pairing. The exchange rate, which is currently trending in the region of 0.6916, is unlikely to be heavily affected unless an important announcement is made concerning either the situation in Russia or Iraq.

Australian Dollar to Euro (AUD/EUR) Forecast

Early tomorrow morning will see some important Australian data released, namely the NAB Business Confidence which will be a good indicator of the direction of the Australian economy.

Tomorrow will also see some important European data released. The Eurozone ZEW Survey for Economic Sentiment and the German ZEW Survey for Economic Sentiment will be good markers for European economic direction. Perhaps most important, in terms of gauging the directional performance of the Euro, is the German ZEW Survey (Current Situation). Expert opinions on whether the current situation is improved, worsened, or unchanged are summarized as the number of positive responses minus the number of negative responses. It is forecast to drop from a previous posting of 61.8 to 54.0.

Wednesday’s Chinese data releases will alter the ‘Aussie’, particularly the Industrial Production data which is forecast to drop fractionally from 9.2% to 9.1%.

The Australian Dollar to Euro (AUD/EUR) exchange rate hit a low of 0.6912.