The EUR/AUD currency pair gained more than 0.5% on Wednesday, as the Euro surged on renewed confidence that the European Central Bank will maintain a forceful approach to inflation.
ECB policy maker Francois Villeroy de Galhau underscored this stance on Tuesday, reiterating that the central bank “will do what is necessary” to ensure inflation remains in line with its target.
ECB Executive Board member Isabel Schnabel has been vocally backing a rate hike in June. She argued that the Euro Area had moved beyond earlier adverse energy scenarios and cautioned that second-round effects were widening as energy shocks linked to the Middle East fueled persistent price pressures.
According to Schnabel, preserving the ECB’s credibility calls for a rapid and decisive policy reaction, even if such measures pose downside risks to growth.
Meanwhile, the Australian Dollar weakened following the latest inflation update.
Data by the Australian Bureau of Statistics released on Wednesday showed that the Consumer Price Index had risen 4.2% year-on-year, undershooting the market consensus of 4.4% and slowing from the 4.6% increase recorded in the 12 months to March 2026.
The Reserve Bank of Australia’s preferred core measure, the Trimmed Mean CPI, rose 0.3% on the month and 3.4% on an annual basis in April, pointing to a moderation in underlying price pressures.
This moderation in inflation came alongside an unexpected increase in the Australian unemployment rate to 4.5% in April and a drop in the number of employed persons.
Even with the slowdown, inflation still remained above the Reserve Bank of Australia’s 2% to 3% objective, which kept the door open for another rate hike at the RBA’s August meeting.
The EUR/AUD currency pair was last up 0.55% on the day to trade at 1.6304.
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