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During the middle two weeks in May there was minimal net change in the euro/Aussie exchange rate. Both currencies were losing ground to the American dollar, which had rediscovered its mojo after two months on the defensive. Towards the end of the month they diverged, the euro picking up ground against the US dollar while the Aussie carried on lower. At the beginning of June both currencies moved higher against the Greenback but the euro moved faster and further.
The net result is that the euro has strengthened by four Australian cents in the last month. Against the US dollar the euro is up by a cent while the Australian dollar has fallen by three. All of the commodity-oriented currencies had a fairly rough ride: the NZ dollar was down by almost twice as much as the Aussie and the South African rand fell even further than the Kiwi.
Most of the Australian economic statistics to emerge in May were either not helpful to the Aussie or actively unhelpful. Investors took a particularly dim view of a sharp quarterly fall in private sector investment. Things looked up in June though. The Reserve Bank of Australia failed to make the rate cut that some had feared and economic growth for the first quarter came in stronger than anticipated.
The euro zone economy grew by less than Australia's in Q1 and during the first three weeks of May the data coming out of Euroland were similarly uninspiring. Towards the end of the month the picture started to improve just as investors' attention was swinging back to the four-month-long spat between the Greek government and its creditors, the IMF/EC/ECB "troika".
Investors decided they liked what they saw, especially after the leaders of Germany, France and the troika held a special meeting in Berlin to put together a "final offer" to Athens. Since then, and despite the postponement of a €300 million repayment by Greece to the IMF, the broad view has been that neither Athens nor Euroland would benefit from Greece's default or its exit from the single currency. That being the case, they are more likely than not to come to a compromise.
But the deal is not yet done and both sides continue to stick to the "no surrender" line. Before the end of June Greece must repay €1.6 billion to the IMF, something it will be unable to do unless an agreement is reached and the bailout payments restarted. The euro is not out of the woods yet.