The EURAUD exchange rate has data on Monday that could add volatility to the pair.
EURAUD – Daily Chart
The price of EURAUD dipped on Friday ahead of resistance at the 1.6627 level. That will be the barrier to further gains in the pair.
The economic calendar for the week starts with TD-MI inflation from Australia at 8 am HKT. That will be followed at 8:30 am with ANZ job advertisements for October.
That will move to Europe where a busy day of manufacturing data for October includes data from Spain, France, Germany, and the Eurozone.
The euro has bounced against the Australian dollar recently, despite an imbalance in interest rates. The Australian Reserve Bank meets on Monday and will deliver its latest interest rate decision on Tuesday.
Analysts do not expect to see any change from the RBA on Tuesday and the major banks differ on their expectations for an initial rate cut. ANZ bank expects rates to drop in February. Commonwealth Bank and Westpac also agree on the February timeframe and NAB stands alone with a March expectation.
Eurozone money markets are now pricing in a terminal rate of around 1.80%, which is well below the ECB’s current policy rate of 3.25%. Economists at the major banks think the ECB will need to go further and potentially cut rates by 50 basis points per meeting over the next six months.
“We see risks that markets might eventually price a terminal rate marginally below 1.50%,” Nomura analysts wrote.
Economists at Morgan Stanley stated that the ECB’s nominal rate might even be as low as 1.0-1.4%. This factors in a 2% inflation target and accounts for a weak economy.
