The developments surrounding the Coronavirus are having a highly significant effect on the currency market and few other currency pairings alongside the EUR/AUD exchange best show the extent of this volatility. Whilst the pairing is currently trading at 1.83 on mid-market we have seen within the last week an 11 year high of 1.97 on the very recent 19th March which was the best time to buy Australian Dollars with Euros since March 2009. This decade-high has since dropped 6.6% of its value in the space of 7 days showing how vast these fluctuations could be.
Several factors have been contributing to these rapid peaks and troughs within the market. One of the more significant elements is that of the Australian Dollar’s commodity currency status. This means that the AUD reacts quickly to any changes in commodities such as food demand and oil prices. Both of which have been affected due to a reduction in transport as global movement of people and goods are becoming increasingly restricted. Oil is certainly one of the worst-hit industries with markets such as the US WTI Crude having seen the price of a barrel of oil drop from $49.90 to $23.68 in the space of the last 30 days.
It has also been considered that for the Coronavirus and other times of global uncertainty such as warfare, investors look to safe haven currencies such as the USD which is less sensitive to global rate changes due, in part, to it being the most globally traded currency. Having said that, whilst the EUR/USD exchange has fluctuated roughly 6 cents month to month, it has not been a freefall for the Euro unlike other currencies like Sterling. Currently the Euro has been rising against many major safe havens for the past week which is surprising given that the countries with the two high death rates globally, Spain and Italy at 3434 and 7503 respectively, are both within Europe which is demonstrating its, at least current resilience, to COVID-19.
The effects of the EUR/AUD rate may continue to remain volatile as the virus is nearing the 500k infections milestone and breached the 20k death toll. These numbers are continuing to increase exponentially as the epicentre had moved away from China and now is firmly placed with Europe and the US.
Asides from the Coronavirus most of the EUR/AUD rate change will be driven from Europe as economic data as Australia has just a few low-medium volatility data releases such as MoM Retail sales and New Home sales next week with no big announcements for the rest of this week. The single-currency, however, will see the YoY Consumer Price Index on Tuesday morning giving a clear insight into the changes in the cost of living for goods and services. Any changes away from any standard deviations may see a movement in the rates.
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