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EUR AUD Stable Following Sharp Uptick in German Economic Sentiment

The Euro Australian Dollar (EUR AUD) exchange rate held close to a three-week high this morning as German economic sentiment rallied sharply this month.

Euro (EUR) Stable as German Economic Sentiment Rockets Higher

The Euro remained in a position of strength this morning as markets reacted positively to a rebound in Germany’s latest economic sentiment index.

According to data published by German economic research institute ZEW, the domestic sentiment index rocketed up from 10 to 17 this month, easily beating expectations of a more modest rise to 12.5.

The swift recover in confidence appeared to be largely driven by the release of solid growth figures for the second quarter, combined with a notable rise in bank lending and investment activity by both private firms and the government over the last month.

ZEW president Achim Wambach said;

‘The solid growth figures in the second quarter of 2017 in combination with a steep rise in bank lending and increasing investment activities by both the government and private firms are likely reasons for the financial market experts’ significantly more positive outlook compared to that of last month.’

While economic confidence saw a dramatic recovery from the downturn in August the index still remains below the long-term average of 23.8, which can likely be attributed to concerns over the upcoming election in Germany and the European Central Bank’s (ECB) continued commitment to its ultra-loose monetary policy.

Australian Dollar (AUD) Unchanged by RBA Minutes

Meanwhile sentiment in the Australian Dollar remained largely unchanged last night despite the release of the minutes from the Reserve Bank of Australia’s (RBA) September policy meeting as they remained broadly in line with market expectations.

However the RBA did make reference to concerns over the recent strength of the ‘Aussie’ as policymakers warned that it could hamper domestic growth.

The RBA minutes read;

‘The appreciation of the Australian dollar over recent months, driven in part by a broad depreciation of the US dollar, was weighing on domestic growth and contributing to subdued inflationary pressure.’

‘A further appreciation of the Australian dollar would be expected to result in a slower pick-up in growth and inflation.’

However with the meeting taking place before the release of last month’s impressive employment data, markets were unconcerned by some of more cautious remarks from policymakers.

EUR AUD Forecast: German Producer Prices to Have Slipped in August?

Looking ahead the EUR AUD exchange rate may be forced to relinquish some of its recent gains tomorrow with the release of Germany’s latest Producer Price Index (PPI) as economist forecast price growth will have slipped from 0.2% to 0.1% in August.

Meanwhile AUD investors will be focused on the upcoming RBA bulletin set to be published on Thursday, with the Australian Dollar likely to strengthen if the bank is more upbeat in its economic outlook.

Current Interbank Exchange Rates

At the time of writing the EUR AUD exchange rate was trending around 1.4985 and the AUD EUR exchange rate was trending around 0.6671.