Did you know the eurozone (the 19 countries who use the euro as a currency) is actually the world’s 2nd largest economy?1 In recent years, the European Union (EU) has faced considerable challenges, and the AUD/EUR exchange rate has fluctuated substantially in the last ten years from a high over A$2.00 to a low of A$1.10.
Please keep in mind that OFX does not provide personal advice or specific exchange rate forecasts and predictions; however, here are some general considerations you can use when evaluating forecasts and making your own decisions regarding the best time to transfer your money internationally.
Some key considerations in EUR forecasting
When attempting to forecast the movement of the AUD/EUR exchange rate, investors may take into account these eurozone-specific factors:
- The globalisation backlash. In this era of peak globalisation, many advanced economies--including the U.S. and U.K.--have witnessed rising opposition amongst the population in regard to current policies. Any attempt made by politicians to revise current labour and trade agreements could profoundly affect the euro forecast. According to Fidelity Investments, “anti-globalisation policies may boost labour costs, spur inflation, and put pressure on profit margins.” When considering an international money transfer, some people choose to pay attention to upcoming elections, referendums, and anticipated policy announcements, as they could have powerful effects on trade balances and the AUD/EUR forecast.
- The sovereign debt crisis. It began with Greece, Portugal, Spain and Ireland, but the sovereign debt crisis triggered by the 2008-2009 global financial meltdown is still sending shockwaves through the eurozone. As of 2016, the world’s oldest bank, Banco Monte Dei Paschi in Italy, is in dire need of a bailout due to 360 billion euros worth of bad loans to small Italian businesses battered by recession.2 The conflict is a trifecta of uncertainty: constituents in non-indebted countries are tired of bailing out their neighbours, Italy has the 3rd largest GDP in Europe, and the International Monetary Fund (IMF) doesn’t expect Italy’s economy to recover to pre-2008 levels until sometime around 2025. That said, the eurozone still boasts some of the world’s biggest and best-known companies with really reliable balance sheets (think Daimler, Airbus, L’Oreal, and Unilever.) That’s why it’s important to take into account the diversity of the eurozone environment when reviewing euro forecasts.
- The German economy. Germany is the 3rd largest export economy in the world; it is simultaneously the world’s 3rd largest importer.3 It's major export is cars, and its manufacturing sector drives the European economy (pun totally intended). The German Chancellor is one of the most influential people in the EU, so some people may wish to keep an eye on Germany when deciding the best time to transfer money overseas.
- Speculation. Professional currency traders attempting to tap into investor sentiment can play a key role in driving EUR movements. A prime example of this came during the 2016 U.K. referendum on EU membership, known as Brexit, when the pound sterling (GBP) hit a 30-year low against the U.S. dollar. Part of the pound’s decline was based on concerns that it would no longer attract capital flows from abroad. Similarly, a tense immigration situation in many member states, concerns of terrorism in France, and the resurgence of far right political candidates may sway investor perceptions and the subsequent euro forecasts.
Currency markets can be fickle, and it can be difficult to determine the best time for your overseas money transfer. At OFX, we offer a number of risk management tools to help you make the most of your money. If you’re ready to make an overseas money transfer, you should know that big banks charge big margins on foreign exchange transactions, often up to 5%. Instead, register with OFX and lock in a great rate and find out why thousands of people around the world trust OFX to complete their international money transfers.
Read about our exchange rate forecasting article and general macroeconomic factors to consider.
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