The Euro Australian Dollar (EUR AUD) exchange rate was able to stem its recent losses this morning thanks to better than expected employment data from Germany.
Data compiled by the German Federal Labour Office reported that Germany’s Unemployment Rate unexpectedly fell from 5.9% to 5.8% in March, reaching a new record-low as jobless figures fell by 30,000, outpacing the more modest 10,000 drop that had been predicted.
Detlef Scheele, head of the Federal Labour Office, said;
‘The labour market remains favourable. The number of unemployed fell significantly with the onset of spring, and employment growth continues unabated.’
However there were also concerns that the ongoing refugee situation in Europe could threaten any further improvement in employment this year. As Andreas Rees, an economist at UniCredit Bank AG in Frankfurt explained;
‘Throughout the course of the year you could see the number of jobless people rise again because of the refugee situation, but it’s difficult to say when that will come.’
The EUR AUD exchange rate was also strengthened today by the release of the draft guidelines for the EU’s Brexit negotiations.
The draft will be sent to the remaining 27 members of the EU for approval and will dictate the directions of negotiations with the UK, which Tusk has said will not be ‘punitive’.
The strategy, which was outlined by European Council President Donald Tusk earlier this morning, suggests that the EU will be willing to discuss its future trade relationship with Britain, but only once the two sides have made significant progress towards reaching an agreement over the UK’s departure.
The guide also mentions the issue of a ‘divorce settlement’ with Tusk looking to ensure that the UK respects its financial obligations with the EU, which analysts estimate will lead to a bill of around €60bn.
Meanwhile the Australian Dollar was strengthened overnight as China –Australia’s largest trading partner- released its latest Manufacturing PMI.
AUD investors were upbeat following data from China’s National Bureau of Statistics (NBS) that showed the manufacturing PMI climbed from 51.6 to 51.6 in March, beating expectations that it would remain unchanged and reaching its highest level in five years.
High-tech manufacturing in particular saw strong growth, as the NBS reported that the sector jumped 2.4 points to 54.2 in the last month.
With the data suggesting that the uptick in activity at the end of last year will likely continue into 2017, markets are hopeful that it will translate into increased demand for commodities such as iron ore and coking coal.
Looking ahead the EUR AUD exchange rate may trend higher at the start of next week should the Eurozone’s Unemployment figures show some improvement in February.
However the Euro may find itself coming under increasing political pressure as Europe now faces both the uncertainty of the upcoming French elections and the complexities of removing the UK from the EU.
Meanwhile, the Australian Dollar may also cede ground next week as the Reserve Bank of Australia (RBA) holds its latest policy meeting on Tuesday, with economists predicting that the bank will vote to leave interest rates on hold as it adopts an increasingly dovish tone.
Current Interbank Exchange Rates
At the time of writing the EUR AUD exchange rate was trending around 1.39 and the AUD EUR exchange rate was trending around 0.71.