Nonfarm Payroll figures for the month of December turned out to be revised downward in the US, Australia, and Canada. In fact, all three currency pairs were in negative territory on the month. The Australian Dollar and Euro fell by about two US cents and one Euro respectively. This brings us to the current global economic crisis, which is the main reason for the current recession. Will this type of nonfarm payroll number to affect the strength of the Australian Dollar and Euro when the data for the third quarter of the year comes out in January?
Economic News The most recent economic news that has come out includes a weakening of the Japanese Yen, which may have negative implications for the Australian Dollar and Euro. Japan is cutting stimulus measures and raising interest rates to try and bring back consumer confidence. This will surely have a negative impact on the Aussie dollar as it directly affects several of its major trading partners. Will other countries follow suit or are we just waiting for the situation to get worse?
European Economic Data European Union data showed that there was a strengthening of the euro as the European Central Bank took the bullion back into storage. The euro strengthened versus most of its major counterparts including the US Dollar, British Pound and the Euro against the Swiss Franc. The data came just hours before the release of the Non-Farm Payroll figures for the month of December. Will this affect the strength of the Australian Dollar and Euro? It’s hard to say right now but history does suggest the Australian Dollar and Euro could take a hit if the European Central Bank continues to raise interest rates.
The Australian Dollar and Euro Fall As mentioned above the latest Non-Farm Payroll figures for the month of December came in lower than expected, which could mean the Aussie Dollar and Euro could fall further. Traders may start to price the euro higher against the US Dollar once the data is released because it seems the European Central Bank is concerned about the weak euro, which may have been driven by slowing European exports. If the euro continues to weaken then it will hurt the economies of countries that export to the European Union including Italy, Spain and Greece. These are some of the European Union’s largest trading partners, so any weakening of the euro will have a negative impact on their gross domestic product.
Forex News Although the European Central Bank has stated they are not considering an interest rate hike to solve the credit crisis, it has been a catalyst for additional weakness in the euro and the Australian Dollar. European Union data released today indicated that global economic growth weakened in Q3 2021 compared to Q2, which led to a significant strengthening of the euro and Swiss Franc. Markets around the globe are pricing in more risk due to the uncertainty of whether a rate increase will be given by the EU.
Where to Buy When trading the Aussie Dollar and Euro both against the US Dollar, it is important to make sure you buy when the markets are low and sell when the markets are high. With the US Dollar weak versus other major currencies, including the GBP, the Aussie dollar has been a popular choice in many Asian markets including Japan, Hong Kong and China. Investors who are looking to get in before the market begins to weaken should purchase an Australian Dollar with a length of maturity greater than 6 months to be able to cover market fluctuations. This ensures you will cover the major currency pair during the time of market weakness and not lose your money if the market moves against you. Investors may also want to consider purchasing the Euro at the time of a weakness to lock in some profits before the momentum of the falling euro drives the market back up. When the markets move against you sell your Aussie Dollar and buy the Euro.
Market Players Should watch the G7 as the summit meeting of the G7 takes place in The United States this week. The meeting of the G7 will most likely be a time to talk about the state of the world economy and a time to announce new initiatives to combat the terrorism in the world. The outcome of this meeting could have an effect on the Bank of Canada’s interest rates and the USD/AUS currency. If the US dollar weakens and the Bank of Canada raises its base interest rate, then the Australian Dollar would likely increase against the US dollar. If the Australian Dollar strengthens and the Bank of Canada reduces its base rate, the Australian Dollar would likely depreciate against the US dollar.
The Australian Dollar and the Euro are likely to move in opposite directions from this announcement. In fact, the EUR/USD is expected to weaken slightly against the Aussie dollar after the G7 meeting. The Japanese Government has also issued a warning to investors about the risk of the market turbulence. Markets have been speculated that this warning may cause some investors to remove their investments from the mark