Australian Dollar falls in major move against Euro as consumer confidence hits 30 year low
After a week-long period of no movement, the Euro has suddenly leapt into life this morning against the Australian Dollar.
Suddenly, as the markets in Europe began their trading week, the Euro rose to 1.584 against the Australian Dollar in the pre-opening early hours of the morning, representing a considerable move given that major currencies are not known for their volatility. Indeed, some entire trading strategies have become based on low volatility as this has been the status quo for many years now.
At the beginning of this month, the EURAUD pair was trading at 1.558, therefore a rise to 1.584 is, by comparison to general movements among major currency pairs, absolutely massive.
Whilst the Euro's move against the Australian Dollar is the largest currency move of the day, it is worth noting that the British Pound made a similar gain over the Australian Dollar, for similar reasons.
It is possible that part of this lack of confidence in the Australian Dollar may come from the continual hectoring that the Australian government appears to be engaging in toward its businesses and citizens.
For example, yesterday it was reported that Australian citizens returning from overseas trips have been asked to hand their smartphones over to the Australian Border Force, with one particular report having stated that a man and his partner were instructed to write their phone passcodes on a piece of paper, before the border officials took their phones into another room.
This is the latest in a long line of draconian restrictions and surveillance efforts being carried out by the Australian government, which has become known as one of the most stringent on earth when it comes to enforcing curbs over Covid 19, and curbs, data security and privacy issues, and a seemingly illiberal position taken by government are not often viewed as favorable conditions for a thriving economy.
Such curbs have therefore dented confidence in the Australian economy, and cast doubts over its position as a liberal and poltically free country going forward.
It could be that as parts of Europe still have some restrictions whereas others have none, trade between Euro-denominated countries and other regions of the world is becoming a bit easier, whereas Australia, whose main trading partner is China and in which personal movement and what could have been considered the normal way of life before March 2020 has shown no sign of return.
The EURAUD pair has moved 0.54% since yesterday, which was already an upward turn over Friday's close at just over 1.57.
The real elephant in the room is that Australia's Consumer Confidence index, which is used to measure how buoyant the retail part of the economy is, is at a very low point.
Figures were revealed for January 2022 this morning and it shows that many Australians are avoiding spending. In fact, confidence is at its lowest point since 1992, and just last week alone, Australian consumer confidence fell by 7.6%, sinking to its lowest rate since October 2020.
Data for all of Australia's states fell below the neutral confidence level of 10o, and to accompany this negativity, all of the subindices were also down, including current financial conditions having declined by 11.3%. The number of respondents to the confidence index survey who stated that now was “the time to buy a major household item” also reduced by 11.4%.
Things are very different in today's Australia compared to how they were at the beginning of 2020, and the terse relationship with China combined with the ongoing government position on Covid are weighing heavily on the minds of investors looking at the immediate future.
Gary Thomson is the Chief Operating Officer at FXOpen UK. Having spent over 20 years of his career working in financial services, Gary is renowned for his expert market analysis and commentary.