The Euro to Australian Dollar (EUR/AUD) exchange rate weakened more than 0.50% on Wednesday morning.
The Euro to Australian Dollar (EUR/AUD) exchange rate slumped to a session low of 1.4266
Stronger-than-forecast Gross Domestic Product (GDP) data out of Australia sent the Australian Dollar higher against the majority of its most traded peers.
According to official statistics the nation’s economy expanded by 0.9% in the first quarter of the year as it received a boost from improved activity in mining and the financial services sector. Economists had been forecasting for a growth rate of 0.7%. Year-on-year the Australian economy was shown to have expanded by 2.3% in the three months to March. Economists had been expecting a growth rate of 2.1%.
Following the release of the data the ‘Aussie’ jumped higher against the Euro, US Dollar (USD) and Pound Sterling (GBP). As the session progressed the ‘Aussie’ slowed its rise as economists warned that the report showed that there was room for improvement.
‘The March quarter GDP growth was far better than feared just a few days ago. However, Australia is still not out of the woods, as annual growth at 2.3% is well below potential, and a full 0.8% points of the 0.9% growth came from higher inventories and trade. So the Australian economy has not crashed as many had feared would happen after the end of the mining boom, but it is continuing to grow at a subpar pace,’ said economist Shane Oliver.
Chinese Data Also Supports Australian Dollar (AUD) Exchange Rate
The Australian Dollar was also supported by the release of positive data out of China. As the Asian nation is Australia’s largest economy any good news out of the world’s second largest economy tends to buoy the ‘Aussie’.
The headline HSBC/Markit Purchasing Managers Index (PMI) for May increased from 52.9 to 53.5. Economists had been expecting a fall to 52.6. The new business sub-component was at 54.4, up from 52.8 in April and the highest reading since 54.7 in May 2012.
Greece and Data Weighs on Euro (EUR) Exchange Rate
Sentiment towards the Euro remains under pressure as the Greek crisis drags on. Released data also showed that worries over the situation weighed upon Eurozone growth. According to Markit, the Eurozone Composite Output Index fell from 53.9 to 53.6, meaning that the sector expanded at a slower rate.
The Euro is likely to see more volatility later in the session as Eurozone retail sales and unemployment data is released. The European Central Bank (ECB) will also announce its latest interest rate decision.