EUR/AUD Exchange Rate Muted as Weak Trade Drags on German Growth
The Euro Australian Dollar (EUR/AUD) exchange rate is trading narrowly this morning as investors reflect on Germany’s latest GDP figures.
At the time of writing the EUR/AUD exchange rate remains virtually unchanged from today’s opening levels.
Euro (EUR) Exchange Rate Struggles as Germany Growth Plummets
The Euro (EUR) is struggling to make any real headway against the Australian Dollar (AUD) this morning after the single currency was knocked by the release of Germany’s latest GDP figures.
According to data published by Germany’s Federal Statistics Office, Destatis, the Eurozone’s largest economy only expanded by 0.3% in the first quarter of 2018.
This was a significant slowdown from the 0.6% growth reported at the end of 2017 and was even lower than the 0.4% growth that had been forecast by economists, dragging on the EUR exchange rate.
Analysts at Destatis attributed the slowdown to ‘less dynamic’ trade, with both exports and imports reported to have declined from the previous quarter.
The report also suggested that a fall in government spending, for the first time in five years is also likely to have negatively impacted domestic growth at the start of the year.
However despite the disappointing data investors appear to be taking the news in their stride, with a number of analysts appearing largely unfazed by the data, amid suggestions the slowdown may be temporary.
Carsten Brzeski, economist at ING said:
‘A couple of one-off factors like the cold winter weather, early Easter vacation and strikes probably distorted first quarter data.
Despite some minor levelling off, capacity utilisation is still close to record highs, assured production in the industry is close to all-time highs and the high stock of orders and historically low inventories all bode extremely well for industrial production in the coming months.’
Australian Dollar (AUD) Exchange Rate Weakened by RBA Gloomy Wage Outlook
Meanwhile the Australian Dollar (AUD) is also on the back foot this morning, following the publication of the minutes from the Reserve Bank of Australia’s (RBA) latest policy meeting.
The minutes revealed the RBA is increasingly pessimistic in its outlook for Australian wage growth.
Guy Debelle, deputy governor at the RBA said:
‘The experience of other countries with labour markets closer to full capacity than Australia’s is that wages growth may remain lower than historical experience would suggest.’
This is particularly worrying for the bank as it is betting on a rise in wages to help bolster economic growth in 2018.
EUR/AUD Exchange Rate Forecast:
Looking ahead the EUR/AUD exchange rate may tick higher later tonight as Australia publishes its first quarter wage price index.
Economists forecast Australian wage growth will have remained flat at the start of 2018, with annualised growth expected to hold at 2.1%.
This will likely see the Australian Dollar (AUD) tumble as it further dents the chances of the RBA raising interest rates any time in the foreseeable future.
Meanwhile the Euro (EUR) may struggle to take advantage of any weakness in the ‘Aussie’ on Wednesday, with the release of the Eurozone’s final CPI reading for April.
The data is expected to show that inflation dipped from 1.3% to 1.2% last month and may be a point of concern for Mario Draghi tomorrow afternoon as the European Central Bank (ECB) President speaks following the banks latest non-monetary policy meeting.