The Australian dollar trended lower through the majority of last week, with the risk-sensitive currency struggling to attract support as a gloomy market mood prevailed through most of the session.
The euro started the week on buoyant form last Monday. Finalised Eurozone consumer price index figures showed the firm levels of inflation that economists had expected, boosting hopes that the European Central Bank (ECB) would indeed soon turn their attention to trimming quantitative easing.
Further improving demand for the euro on the back of a firming Eurozone economic outlook was the latest ZEW economic sentiment surveys from ZEW. Attitude amongst finance professionals clocked up a notable rise, while the latest Eurozone current account surplus also grew.
The latest Economic Bulletin from the ECB failed to curb demand for the euro, despite warning that EUR exchange rates were too strong. Markets currently believe policymakers when they state that they are not intending to intervene in the currency markets in order to weaken the euro, so there is little incentive to heed the warnings of the ECB or expect large downside risks to the common currency.
Much of last week saw the euro trading unsteadily ahead of Saturday’s German election. Angela Merkel and her Christian Democratic Unionist (CDU) party were feeling the heat from right-wing Alternative for Germany (AfD), with many worried about the potential for another populist shock in the Eurozone.
Merkel has succeeded in winning a fourth term, although her share of votes is low by historical standards and she now has to woo the nation’s smaller parties to form a coalition. The AfD have become the third-largest party in the country, gaining enough votes for its MPs to enter parliament – something likely to unsettle markets.
There are plenty of major events on the Eurozone economic calendar this week, although the fallout from Germany’s Federal Election is likely to continue weighing on the euro. ECB President Mario Draghi is set to speak in Brussels this afternoon.
On a data front Thursday will see the release of the latest German consumer price index figures for September, while on Friday German retail sales and unemployment reports will be followed by Eurozone inflation data for September.
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)