It has been an eventual few sessions for EURAUD, as traders flock to both the euro and aussie. The AUD was propelled higher by the RBA’s policy meeting yesterday when the bank wasn’t as dovish as the market was expecting it to be, while EUR rocketed higher after reports that Greece’s creditors reached a deal and eurozone inflation beat expectations. The fun isn’t over yet for EURAUD, with a policy meeting at the ECB tonight and slew of economic data out of Australia over the next two days.
In Europe, the IMF and European Commission have reportedly come to an agreement on what Athens need to do to get its debt under control. There is no guarantee that Athens will accept the deal, but it’s definitely a step in the right direction. The positive news coming out of Berlin was preceded by stronger than expected eurozone inflation numbers – core CPI jumped 0.9% (expected 0.7%). With a policy meeting at the ECB tonight, traders have taken the opportunity to unwind, pushing EURUSD to a resistance zone around 1.1200 in the European session overnight.
Meanwhile, the RBA’s policy meeting yesterday was very eventful for the Australia dollar. The bank noted that Australia’s uncertain and somewhat bleak economic outlook requires accommodative monetary policy, especially considering the RBA isn’t getting much help from the fiscal side of the equation. This is a slightly more dovish tone from the central bank when compared with its last policy statement, but not by much. We still consider this as an implicit easing bias, as opposed to an explicit one, which is too vague for Australian dollar bears; as is the bank’s decision not to expand on its bearish stance on the exchange rate.
This resulted in a drive towards the Australia dollar ahead to today’s Q1 GDP numbers (1130AEST/0130GMT). The market is expecting the Australian economy to have expanded 0.7% q/q and 2.1% y/y, but the risk is skewed to the downside after Q1’s abysmal private capital expenditure numbers. After the growth figures, AUD traders will turn their attention to the release of Australian trade (expected 2.1bn deficit) and retail sales (expected 0.3%) numbers for April.