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EUR AUD Trade Narrows as German Economic Sentiment Slumps

The Euro Australian Dollar (EUR AUD) exchange rate is trending relatively flatly this morning as investors digests the latest German economic confidence figures.

Euro (EUR) Slips as German Economic Confidence Tumbles

The Euro found its early gains stifled this morning as the ZEW institute released its latest Germany economic sentiment survey.

According the data published by ZEW Germany’s economic confidence index plummeted from 17.5 to 10 in August, falling well below expectations that it would dip to 15 and reaching its lowest levels since October.

The decline in sentiment appeared to have been prompted by growing concerns over the recent slowdown in German economic data, particularly in regards to exports as Germany comes under fire for both running a gigantic trade surplus and for the emissions scandal which rocked the nation’s car industry in recent years.

ZEW president professor Achim Wambach said;

‘The significant decrease of the ZEW economic sentiment indicator reflects the high degree of nervousness over the future path of growth in Germany. Both weaker than expected German exports as well as the widening scandal in the German automobile sector in particular have helped contribute to this situation. Overall, the economic outlook still remains relatively stable at a fairly high level.’

The larger than expected drop also led to a notable decline in the overall Eurozone reading as well, with ZEW reporting that the Eurozone Economic Sentiment Index tumbled from 35.6 to 29.3 over the same period, disappointing investors who had previously forecast it would hold at around 34.2.

Australian Dollar (AUD) Resilient as Commodity Prices Surge

Meanwhile the Australian Dollar continues to find strength this week thanks to a strong uptick in commodity prices, particularly in the key Australian exports of iron ore and coking coal.

This is largely thanks to the continued rise in Chinese steel prices which is driving demand for the raw materials used to produce it.

Analysts are also confident that this uptick in iron ore is likely to persist for a little while longer as Chinese rebar production continues to ramp up in order to meet demand.

Richard Grace, chief currency strategist at the Commonwealth Bank said;

‘High Chinese steel margins are encouraging Chinese steel producers to boost output which in turn leads to higher demand for iron ore. We believe this will continue to underpin iron ore prices in the near term.’

EUR AUD Forecast: Eurozone PMI Figures to Show Slight Decline in August?

Looking ahead the EUR AUD exchange rate may struggle again on Wednesday as the Eurozone releases its latest Manufacturing and Services PMIs.

While economists forecast that the Eurozone’s service sector will have continued to grow at a robust pace in August, the manufacturing data is expected to show factory activity slipped slightly this month, likely prompting further speculation that the Eurozone’s explosive growth is beginning to slow in the second half of the year.

Meanwhile a quite period in regards to domestic data is likely to leave the Australian Dollar tied to the fortunes of the commodity market for the remainder of the week.

Current Interbank Exchange Rates

At the time of writing the EUR AUD exchange rate was trending around 1.4873 and the AUD EUR exchange rate was trending around 0.6721.