Euro to Australian Dollar Exchange Rate Continues to Benefit from Risk-Aversion
Despite a lack of market reasons to buy the Euro (EUR) this week, the Euro to Australian Dollar (EUR/AUD) exchange rate continues to trend with an upside bias this week as the Australian Dollar (AUD) feels pressure from risk-aversion.
After opening this week at the level of 1.5753, EUR/AUD jumped to a weekly high of 1.5818 before tumbling again as Eurozone data disappointed investors.
Still, EUR/AUD has been able to avoid losses due to some solid Eurozone inflation data and weakness in the ‘Aussie’. At the time of writing on Thursday, EUR/AUD trended in the region of 1.5780.
Movement for both currencies has been relatively range-bound, due to underwhelming data from both the Eurozone and Australia.
However, ultimately market aversion for risky trade-correlated currencies like the Australian Dollar, as well as signs of weakness in Australian trade data, made it easier for the Euro to Australian Dollar exchange rate to edge higher.
Euro (EUR) Exchange Rates Supported by Signs of Stronger Eurozone Price Pressures
Following some stronger-than-expected Eurozone Consumer Price Index (CPI) inflation data earlier in the week, the Euro benefitted just slightly from Thursday’s data too.
Thursday saw the publication of the Eurozone’s June Producer Price Index (PPI) report, which beat expectations slightly in both monthly and yearly prints.
The monthly figure was forecast to have slowed from 0.8% to 0.3%, but only slipped to 0.4%. Yearly producer price pressures were forecast to rise from 3% to 3.5%, but came in with an even stronger 3.6%.
The unexpectedly strong producer prices were largely due to more expensive energy prices, however. As a result, the data’s upside effect on Euro movement was minimal.
In fact, weaker Eurozone bond yields as well as this week’s underwhelming Eurozone growth and manufacturing data have kept pressure on the Euro, meaning the latest EUR/AUD gains are likely more due to Australian Dollar weakness.
Australian Dollar (AUD) Exchange Rates Sold on Weak Data and Risk-Aversion
The Australian Dollar has been unable to escape from its recent lows in the last few weeks, as every time investors opt to buy the embattled currency from its cheapest levels various factors keep it unappealing.
This week, investors have been hesitant to buy the cheap Australian Dollar due to continued risk-aversion in markets. Most of this week’s Australian data has been disappointing too.
In particular, the Australian Dollar has been unappealing due to weakness and losses in Chinese markets.
As China is Australia’s biggest trade partner, this would normally leave the ‘Aussie’ unappealing regardless. However, this weakness in Chinese markets is also worsening concerns about the US-China trade spat and that it could escalate into a full blown trade war.
Thursday’s Australian trade balance results from June did show the surplus rising more than expected, but as exports fell in June and the previous exports print was revised lower, this did cause concerns about Australia’s trade outlook.
Euro to Australian Dollar (EUR/AUD) Forecast: Australian Retail Sales in Focus
If upcoming Australian data is able to beat market expectations, it may finally give investors more of a reason to buy the Australian Dollar and this could lead to a more sustained fall in the Euro to Australian Dollar (EUR/AUD) exchange rate.
Friday’s Asian session will see the publication of Australia’s June retail sales results, which are forecast to have slowed from 0.4% to 0.3%.
If they are stronger than expected it could cause EUR/AUD to shed much of its recent gains.
Key Eurozone data will be published on Friday too, including Markit’s final July services and composite PMI data for the bloc, as well as the Eurozone’s June retail sales results.
Of course, any surprising developments in US trade protectionism or US-China trade spats could influence the Euro to Australian Dollar (EUR/AUD) exchange rate going forward too.