Euro Exchange Rate advances against Australian Dollar (AUD) and Pound Sterling (GBP)

The Euro was trading higher against the Australian Dollar (AUD) on Tuesday despite the release of data which showed that economic sentiment declined in both Germany and the wider Eurozone.

The Australian Dollar was weaker after the release of the policy meeting minutes for the Reserve Bank of Australia’s June policy meeting. The minutes showed that Australian policy makers are unsure as to how much low interest rates will counter the impacts of a decline in mining investment and tighter fiscal policy.

“The RBA appears to be injecting a little more of that uncertainty into its communication. History tells us that during times of uncertainty the RBA tends to sit on its hands,” said a currency strategist at RBC Capital Markets.

The ‘Aussie’ was also under pressure from the ongoing violence in Iraq. The conflict between the Iraqi government and Sunni militants has reduced demand for riskier assets.
Falling iron ore prices are also having a negative effect upon the currency.

The Pound meanwhile was weakened by the release of data which showed that UK inflation dropped to its lowest level in more than four years. The report showed that the rate of inflation rose by 1.5% last month, down from April’s figure of 1.8%.

The data caused investors to lower their expectations for an interest rate hike and in turned sent the Pound dropping to a session low.

Against the US Dollar the Euro was holding steady as the market awaits the release of the afternoons US economic data.

The Euro was able to retain its gains despite the release of negative data from the ZEW institute.

According to the data, economic sentiment in Germany fell to an 18-month low of 29.8 this month, a steep fall from the 33.1 recorded in May.

The figure was also well below economist forecasts for a figure of 35.0. For the wider Euro zone, the ZEW economic sentiment index rose to 58.4 in June, from a reading of 55.2 in May, confounding expectations for an increase to 59.6.