What is EUR/AUD?
The EUR/AUD forex trading pair represents the exchange rate between the euro (EUR) and the Australian dollar (AUD). It reflects the number of Australian dollars (the quote currency) necessary to acquire one euro (the base currency). The euro, which was established in 1999, is the official currency of the Eurozone, which consists of 19 of the 27 EU member states. It is a widely traded currency managed by the European Central Bank (ECB) that is used for international trade, investment, and value storage.
The eurozone's robust economy and political stability contribute to the euro's growing importance in global FX trading. EUR/AUD, as a popular currency pair in the forex market, provides traders with several opportunities to capitalise on the volatility between these two major currencies.
What affects the price of the EUR/AUD pair?
The Eurozone's economic performance is a key predictor of euro prices. Political events and geopolitical issues can have an impact on the value of the euro. Elections, changes in government policy, Brexit-related developments, and conflicts among EU member states can all cause uncertainty and influence market sentiment towards the euro.
The difference in interest rates between the European Central Bank (ECB) and the Reserve Bank of Australia (RBA) might also affect the attractiveness of each currency to investors. Higher interest rates in one relative to the other might cause the relevant currency to strengthen, affecting the EUR/AUD exchange rate.
Commodity prices have a considerable impact on the EUR/AUD exchange. Iron ore, coal, and natural gas are all exported from Australia. As a result, changes in commodity prices can affect the value of the AUD, which is also known as a commodity dollar in forex. Furthermore, due to Australia's large gold production and exports, the Australian dollar has historically displayed a positive association with gold prices. When the price of gold and other commodities rises, the value of the AUD rises as well, potentially influencing the EUR/AUD exchange rate. Changes in commodity demand, global economic conditions, and supply disruptions can all have an impact on the EUR/AUD currency pair.
China is Australia´s most important trading partner and a major importer of Australian commodities. Chinese economic data can therefore have a significant impact on the Australian dollar.
What to watch out for when trading EUR/AUD?
When trading the EUR/AUD currency pair, keep in mind the strong association of the AUD with other commodity-linked currencies like the Canadian dollar (CAD) and the New Zealand dollar (NZD).
Also, keep an eye out for data releases and announcements from important influential bodies in Australia, the Eurozone, the European Union, and individual member countries (especially Germany, Europe’s largest economy). These include:
- The European Central Bank (ECB) and Reserve Bank of Australia (RBA) for Interest Rate and monetary policy decisions
- Eurostat and the Australian Bureau of Statistics (ABS) for data on Trade Balance, wages, Unemployment Rate, Consumer Price Index (CPI), and Gross Domestic Product (GDP).
- Commodity prices (iron ore, coal, petroleum)
- Chinese economic data