How are Central Bank Interest Rate Decisions Forecast to Drive EUR, AUD Exchange Rates?

September 5, 2016 - Written by Minesh Chaudhari

STORY LINK How are Central Bank Interest Rate Decisions Forecast to Drive EUR, AUD Exchange Rates?

Currency Market Forecast for Euro (EUR), Australian Dollar (AUD), Pound Sterling (GBP) Exchange Rates

Here we look at the week's news and the events most likely to impact Euro (EUR), Pound Sterling (GBP) and Australian Dollar (AUD) exchange rates over the next few days.

Today’s session brings a blank as far as tier one global data releases are concerned, however the remaining four sessions of the week bring two significant central bank monetary policy announcements. Our leading data analyst takes a look at the highlights below –

ECB Interest Rate Decision Could Send Euro to Pound (EUR/GBP), US Dollar (EUR/USD) Exchange Rates Lower

The risk event which FX insiders will be eyeing with most anticipation this week comes on Thursday in the form of the latest monetary policy announcement from the European Central Bank (ECB). The decision is likely to have a significant impact on Euro to Pound Sterling (EUR/GBP) and Euro to US Dollar (EUR/USD) exchange rates.

Although global central bankers would flat out deny any collusion on policy, Friday’s disappointing jobs data from the US has, in the eyes of futures market participants at least, made a US interest rate hike a less likely prospect in the near-term.

This fact allows ECB President Mario Draghi increased leeway to consider more policy loosening from his Bank; a cut in any of the ECB’s three headline interest rates is considered unlikely this month, so any such move would hit the euro (currency : EUR) hard.

Recent ecostats from the Eurozone have been mixed, but Germany's Services PMI disappointed - knocking the Eurozone's own index lower-than-forecast. If data from the currency bloc remains a cause for concern we can expect Euro exchange rates to struggle over the next few days.

Dovish ECB Forecast to Drive Pound Sterling to Euro (GBP/EUR) Exchange Rate to New Best Level over 1.20

It is more probable, given last week’s below-expectations euroland inflation numbers, that Draghi will strike a decidedly dovish tone in his post-decision press conference. Such an outcome could be enough to propel the Pound Sterling Euro (GBP/EUR) exchange rate back above the 1.2000 GBP EUR threshold for the first time since July.

How Will Australian Dollar (AUD) Exchange Rates Perform After RBA Interest Rate Decision?

Euro (EUR) exchange rates aren't the only ones likely to be shifted by a central bank interest rate decision this week, Australian Dollar (AUD) exchange rates could also be in for some volatility.

Meanwhile, tomorrow’s session brings another central bank policy decision; the Reserve Bank of Australia (RBA) meets in Canberra during early part of this week and makes its latest policy announcement at 0530 hrs BST tomorrow. Any further cut in Australian interest rates is also considered by analysts to be an outside chance for this month, particularly given that the RBA’s new Governor, Dr. Philip Lowe, takes up his post on 18th September.

Outgoing RBA Governor Glenn Stevens has shown some signs of being D-Mob happy in recent weeks, and has publicly called for increased intervention from Australia’s government to spur growth during public statements. Expect Stevens to once again court controversy in his statement which will accompany tomorrow’s decision – if he repeats his recent assertions that further policy loosening from the RBA might be futile, then the Australian Dollar (currency : AUD) is forecast to improve against the Pound Sterling (currency : GBP).

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