EUR/AUD Exchange Rate Muted Following Abysmal German Orders Data
The Euro Australian Dollar (EUR/AUD) exchange rate is struggling to find any momentum today, in the wake of some extremely disappointing economic data from Germany.
At the time of writing the EUR/AUD exchange rate is virtually unchanged from its opening levels this afternoon, leaving the pairing close to a one-month low.
Weak German Factory Orders Weigh on Euro (EUR) Exchange Rate
The Euro (EUR) remains flat against the Australian Dollar (AUD) and the majority of its other peers today, as Germany’s factory order figures came in well below expectations.
According to data published by federal statistics agency, Destatis, German factory order growth slumped from 2.6% to -4% in June, falling well below expectations of a modest 0.4% contraction and reaching their worst levels since the start of 2017.
Analysts attributed the fall due to recent US trade policy, with many suggesting that the fallout from US trade tariffs may have finally have begun to impact manufacturers.
Carsten Brzeski, Chief Economist at ING, said:
‘German industrial orders took a severe hit in June, dropping by 4% month-on-month, from [up] 2.6% month-on-month in May. On the year, new orders were down by 0.8%.
‘Even though new orders data are highly volatile, the June report could be a tentative sign of how trade tensions are hitting the German economy. Foreign orders from outside the Eurozone dropped by almost 6% MoM.’
German industrial orders took a severe hit in June, which could be a sign that trade tensions are starting to bite, says @CarstenBrzeskihttps://t.co/vqvdajiafI
— ING Economics (@ING_Economics) August 6, 2018
Given the size of the dominance of the German economy in the Eurozone and its reliance on trade, today’s data stuck quite a blow to the Euro.
Australian Dollar (AUD) Exchange Rate Struggles as Trade Tensions Rise
At the same time the Australian Dollar (AUD) also faces headwinds today as trade tensions between the US and China continue to dominate market sentiment.
Trump spoke out on Twitter again claiming that his tariffs ‘are working big time’ and reiterated his desire to rebalance global trade.
Tariffs are working big time. Every country on earth wants to take wealth out of the U.S., always to our detriment. I say, as they come,Tax them. If they don’t want to be taxed, let them make or build the product in the U.S. In either event, it means jobs and great wealth…..
— Donald J. Trump (@realDonaldTrump) August 5, 2018
This has resulted a risk-off tone in markets, especially as Chinese media appears to set its targets on Trump’s trade policies this week.
EUR/AUD Exchange Rate Forecast: RBA Meeting in Spotlight
Looking ahead, the Euro Australian Dollar (EUR/AUD) exchange rate may look to advance overnight on Monday as the Reserve Bank of Australia (RBA) concludes its August policy meeting.
While no policy changes are expected this month, investors will be paying close attention to the RBA’s forward guidance, with a cautious outlook from the bank likely to drag on the Australian Dollar.
However the Euro may be forced to relinquish these gains during the European session on Tuesday following the publication of Germany’s latest industrial production figures.
Given today’s abysmal industrial orders, it’s a good bet that factory output may also have been adversely affected by trade concerns in June, likely leading to a large-than-expected fall in production and weakening the Euro.