Australian Dollar Trends Upward

The Australian Dollar (AUD) trended upwards towards the end of last week following on from better than expected employment data. The trend continued through Friday with minor gains being made against most of the majors during the Australian day trading session.

Only low tier associated with Securities inflation and New Motor Vehicle Sales is scheduled to be released out of Australia today in what appears to be a week absent of high-tier domestic data releases. Increased volatility surrounding the AUD is expected tomorrow with the release of a number of Chinese economic indicators.

The forecast for the Chinese Gross Domestic Product tomorrow is for a slight reduction to the annualised figures of 7.3% to 7.2%, emphasising the slow-down in growth of the Chinese economy. The Retail Sales are expected to remain around the same levels of growth at 12.0% whilst Industrial production appears set to increase from 7.2% to 7.4%. A positive result from the Chinese economic releases is likely to provide contented strength to the ‘Aussie’ (AUD) tomorrow.

Australian Dollar to Euro (AUD/EUR) Exchange Rate Hits 4 Month High

The AUD/EUR exchange rate is current trading around its highest level since early September 2014. Late last week the ‘Aussie’ (AUD) advanced against the Euro (EUR) to the tune of nearly 3% when the Swiss National Bank (SNB) surprisingly removed the peg attaching the Swiss Franc (CHF) to the Euro (EUR).

The Euro-Zone inflation figures were announced Friday evening and result was disappointing for the Euro-Zone, with the Consumer Price index (CPI) coming in at -0.2%. This is the lowest level we have seen since September 2009 and caused the AUD/EUR exchange rate continue its upward trend and reach a 4 and a half month high.

The major announcements this week in the Euro-Zone will occur tomorrow evening and Thursday evening with the release of the Euro-Zone ZEW Survey and the European Central Bank (ECB) Rate Decision respectively. With interest rates currently sitting at 0.05%, no change is expected to the Official Cash rate (OFC); however economists will be listening closely to the tone of Mario Draghi, Head of the ECB, when he speaks following the rate decision.

The AUD/EUR exchange rate has increased drastically this year, improving by over 6% in less than a few weeks. If the trend continues, we may soon see the AUD/EUR trading at an 18 month high in the coming weeks.

Terry Finn