The Euro to Australian Dollar (EUR/AUD) exchange rate is forecast to give up earlier gains and fall as more poor data out of the Eurozone weighed heavily and as attention turns to Thursday’s Interest Rate decision by the European Central Bank (ECB).
Early in the session the Euro had been trading higher against the Australian Dollar as gross domestic product (GDP) data released by the Australian Bureau of Statistics showed that the economy of the ‘Land Down Under’ expanded at a weaker pace than expected. The data showed that the economy expanded by just 0.3% in the third quarter of 2014 and by just 2.7% on an annual basis.
In further bad news for the Australian economy, real gross domestic income fell by 0.4% in the quarter due in large part due to a 3.5% seasonally adjusted fall in the terms of trade during the three months to September. The report adds pressure onto the Reserve Bank of Australia to cut interest rates to new record lows over the coming months. The ‘Aussie’ has been badly hit by tumbling commodity prices and concerns over the global economy.
As the session progressed and data began to be released from the Eurozone, the single currency went onto the retreat, and fell sharply against the Pound, US Dollar and most other major peers.
Business activity across the Eurozone grew less than forecast in November according to data compiled by Markit. Heavy discounting has failed to stop the rot in the region’s major economies with both France and Germany seeing slowdowns.
The final November Composite PMI, which is based on surveys of thousands of companies across the Eurozone, fell to a reading of just 51.1, a drop from the previous month’s figure of 52.1. The report adds to fears that the Eurozone economy is heading towards a contraction next year.
‘The region is on course to see a mere 0.1% GDP growth in the final quarter of the year, with a strong likelihood of the near stagnation turning to renewed contraction in the new year unless demand shows signs of reviving,’ said Markit chief economist Chris Williamson.
Also weighing on the Euro was a retail sales report, which showed that whilst sales returned to growth in October the rise was below economist expectations.
The poor data increases pressure on the European Central Bank to introduce new measures to encourage growth and tackle the threat posed by dangerously low inflation.
Euro Exchange Rate News:
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