Australian Dollar (AUD) Remains Volatile Against Euro (EUR) and Pound (GBP)

The Australian Dollar (AUD) has had a very volatile start to the week, experiencing major swings back and forth against the Euro and trading at a fresh 6 year low against the Pound (GBP) before recovering slightly.

There are a number of medium and minor economic indicators that will be released locally this week. Today the Australian economy will report on New Home Sales and Private Sector Credit readings for the month of May. Tomorrow will see the release of the Performance of Manufacturing Index and Building Approvals prior to the Australian Trade Balance on Thursday and Retail Sales on Friday.

The forecast in relation to the Trade Balance and Retails Sales figures appear at this stage to potentially provide some support for the Australian Dollar (AUD) which continues to remain under downward pressure. Last month’s trade deficit of $3.9B was the worst on record. The expectation is that a large amount of the deficit will be clawed back for the May reading, with economists forecasting a deficit of $2.15B.

Last month’s Trade Balance figure shocked the markets and caused the Australian Dollar to plummet after the release. This will be the figure to watch this week in relation to its’ impact on the value of ‘Aussie’ (AUD). Retail Sales for May are expected to produce a growth figure of 0.4% from the stagnant nil growth reading for the previous month.

Australian Dollar to Euro (AUD/EUR) Exchange Rate Swings Back and Forth

The AUD/EUR exchange rate is likely to be highly volatile over the next 24-48 hours due to continued Greek economic crisis and high-tier economic data releases out of the Euro-Zone. The ‘Aussie’ (AUD) made significant gains against the Euro (EUR) early in this week’s trading session by pushing up approximately 1.5% before swinging massively back in the favour of the Euro by losing all the gains to currently trade at 0.6835 at 0800 AEST after reaching a high of 0.6977 yesterday.

The Greek debt crisis continues with European Union (EU) leaders warning that rejecting the creditors’ proposals in a snap referendum called for Sunday will result in Greece leaving the Euro-Zone. The EU are strongly urging a ‘yes’’ vote, however there have been thousands of ‘no supporters’ rallying in Greece overnight, with banks remaining shut. The rebound in the value of the Euro has been described as “classic risk aversion effect”.

Last night’s German Consumer Price Index (CPI) resulted in a lower inflation reading than the forecast, however, much of the data was overshadowed by the focus on news out of the Greek economy. Tonight the German Unemployment Rate will be communicated, with experts expecting no change to the current 6.4% level. The Euro-Zone CPI Core figure will also be announced and a reduction to the annualised 0.9% to 0.8% is the likely result. A decrease to the Euro-Zone CPI provides an opportunity for the AUD/EUR exchange rate to potentially push back up into the 0.70’s late this week, for the first time in 4 weeks.

Australian Dollar to Pound Sterling (AUD/GBP) Exchange Rate Trading Around 6 Year Low

The AUD/GBP exchange rate opened this week at a fresh 6 year low before gaining back half of a percent back during the Australian trading session and overnight.

Overnight, UK finance lending data was announced in the form of Mortgage Approvals and Net Consumer Credit with the result falling under the expectation in both categories, allowing the AUD/GBP exchange rate to climb slightly. Tonight the finalised Gross Domestic Product (GDP) figure for the first quarter of 2015 is very likely to show an increase from 2.4% to 2.5%.

Terry Finn