Euro Australian Dollar (EUR/AUD) Exchange Rate Flat as Eurozone PMI Data Disappoints
UPDATE 4/12/19: The Euro Australian Dollar (EUR/AUD) exchange rate was left flat on Wednesday, leaving the pairing trading at around AU$1.6184.
The ‘Aussie’ was left under pressure as Q3 GDP growth disappointed. The Australian economy only expanded by 0.4% as shoppers could not be tempted to spend more despite lower interest rates and $25 billion worth of tax cuts.
Consultancy Capital Economics noted that the ‘measly’ increase in household spending was the ‘slowest since the global financial crisis and underlines that the government’s tax cuts aren’t providing any boost to consumer spending.’
Meanwhile, the single currency was left flat after data revealed the Eurozone PMI composite remained unchanged in November.
Added to this, the bloc’s services PMI was the second-lowest recorded since January, which weighed on EUR.
Euro Australian Dollar (EUR/AUD) Exchange Rate Slips Ahead of Aussie GDP
The Euro Australian Dollar (EUR/AUD) exchange rate slumped on Tuesday by around -0.5% following the Australian central bank’s rate decision. The pairing is currently trading at around AU$1.6161.
In its last meeting of the year, the Reserve Bank of Australia (RBA) left its official interest rate unchanged at 0.75%.
The bank is waiting for its three previous cuts previously delivered to stimulate the sluggish Australian economy. However, markets believe more easing will be needed to help the economy.
In a statement following the RBA’s decision, Governor Philip Lowe said:
‘The Board is prepared to ease monetary policy further if needed to support sustainable growth in the economy.
‘The Board also agreed that due to both global and domestic factors, it was reasonable to expect that an extended period of low interest rates will be required in Australia.’
Today’s decision from the RBA comes just a day before growth data, which should show the economy expanded by around 0.5% in Q3.
Annual growth is forecast to rise by around 1.7%, rebounding from a decade low of 1.4% during Q2. This will support the bank’s hopes for a turnaround and provide further support for AUD.
Euro (EUR) Slumps as US Propose New Tariffs
The single currency retreated as US President Donald Trump proposed new tariffs of up to $2.4 billion of French goods.
Champagne, handbags, cheese and other products could be hit with up to 100% tariffs. This comes after the US concluded France’s new digital service tax will hurt US tech companies.
Added to this, US Trade Representative Robert Lighthizer said they were also deciding whether or not to open similar investigations. This could send EUR lower as the US could look into digital service taxes of Austria, Italy and Turkey.
Lighthizer noted:
‘The USTR is focused on countering the growing protectionism of EU member states, which unfairly targets US companies.’
He also added that the move ‘sends a clear signal that the United States will take action against digital tax regimes that discriminate or otherwise impose undue burdens on US companies.’
Euro Australian Dollar Outlook: Will Strong Aussie GDP Buoy AUD?
Looking ahead to Wednesday, the Australian Dollar (AUD) could extend its gains against the Euro (EUR) following the release of Aussie growth data.
If GDP reveals the economy has expanded more than expected during the third quarter as the RBA expect, ‘Aussie’ sentiment will rally.
Meanwhile, the single currency could remain under pressure following the release of the Eurozone’s services PMI.
If Markit shows the bloc’s services sector is near stagnation in November, the Euro Australian Dollar (EUR/AUD) exchange rate is likely to fall.