The EURAUD exchange rate has data ahead on Tuesday, and election fears can also weigh on the euro.
The price of EURAUD is testing a key support level at 1.6150. If that level is breached, the next target is 1.5848.
The Reserve Bank of Australia has a rate meeting on Tuesday at 12:30 pm HKT. The RBA is expected to keep the cash rate steady, sparing homeowners any increase in rate hikes and delaying a long-awaited rate cut.
Recent data showed that profits at retailers were struggling as consumers cut back on spending. Lower commodity prices also meant that profits at mining firms were lower, falling 6.1% over the first quarter. That led to economists sounding the alarm over a potential recession in the country.
Economists expect the bank to cut rates this year but are concerned about inflation. The Bank of Canada and the European Central Bank were the first to start cutting rates recently. If they hold rates, that could pressure the euro as investors may see the potential for the ECB to ease rates if contagion pressures grow.
European core inflation and the ZEW economic survey data for Germany and the Eurozone will follow at 5 pm HKT. Both readings are expected to show an improvement in economists’ expectations for the Eurozone. However, that is a trailing indicator, as indicated by surveys before the recent European elections.
The euro currency could be sold off against the Aussie dollar as a haven trade. With contagion fears over the coming French elections, money will be happy to move to Asia or Australia.
Recent data showed that Australia’s business confidence turned negative, and conditions fell below average, hinting that high interest rates continue to pressure consumers. However, the country’s employment picture showed improvement, so the RBA may be in no rush to adjust its monetary policy.
“Overall, the message here is a mixed one for the RBA,” NAB analysts said. “We expect the RBA to keep rates on hold for some time yet,” they added.