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Euro to Australian Dollar Exchange Rate Climbs to 3-Year-High as Investors Avoid Risks

Euro to Australian Dollar Exchange Rates Climb despite Underwhelming Eurozone Data

Despite this week’s optimistic Australian data and underwhelming Eurozone data, the Euro to Australian Dollar (EUR/AUD) exchange rate has continued its gradual climb and touched a new yearly high on Thursday morning.

Since opening this week at the level of 1.6135, EUR/AUD briefly dipped as the Australian Dollar (AUD) pushed away from its worst levels. However, since then EUR/AUD has begun to climb again.

On Thursday, EUR/AUD touched a high of 1.6215. This was the best EUR/AUD level since August 2015 – over three years ago.

Some strong Australian ecostats and even a more neutral Reserve Bank of Australia (RBA) than expected were not enough to help the relatively risky Australian Dollar from seeing further losses.

Investors are concerned Australia’s economy could be more notably impacted by US-China trade tensions, leaving the Euro (EUR) more appealing as it hit new highs against the Australian Dollar.

Euro (EUR) Exchange Rates Sturdy despite Weak German Factory Data

Analysts had been expecting German factory orders to see solid growth in July, but when July’s factory orders report was published on Thursday it showed another surprising contraction.

The previous figure was revised slightly higher from -4.0% to -3.9%, but the July figure came in at -0.9% rather than the forecast 1.8%.

Analysts perceived the disappointing factory data as being indicative of global trade jitters having an impact on German economic activity. The weaker activity was due to a slump in demand for abroad.

There had been a truce on EU-US trade tariff plans, but last week US President Donald Trump said that the EU was ‘almost as bad as China’. This worsened concerns that the EU could still be hit by US trade protectionism directly too.

Despite this though, the Euro continued to climb thanks to Australian Dollar weakness.

Wednesday’s Eurozone composite PMI may have supported the Euro too, as it beat forecasts and rose from 54.3 to 54.5.

Australian Dollar (AUD) Exchange Rates Limp as Market Risk-Aversion Worsens

Some optimistic Australian data and a less dovish than feared Reserve Bank of Australia (RBA) were not enough to help the Australian Dollar to make a strong rebound from its worst levels all year.

By Thursday, as investors once again became more concerned about US-China trade tensions and the possibility of an escalating trade war, the Australian Dollar was left unappealing once again.

As Australia has strong trade ties with both the US and especially China, the relatively risky trade-correlated Australian Dollar has been vulnerable to the recent global trade uncertainties.

According to Michael McCarthy, Chief Strategist at CMC Markets:

‘Concern is that we will see a further escalation in trade disputes and the impact that has on global trade and a number of trade markets has investors very cautious and in a risk-off mode,’

Due to the trade jitters, the Australian Dollar was unable to benefit from July’s higher-than-expected Australian trade surplus. The figure came in at A$1.551b rather than the forecast A$1.4b.

News that Australia’s exports had contracted from 2.5% to -1.0% in July likely weighed on any optimism about the report.

Euro to Australian Dollar (EUR/AUD) Forecast: Eurozone Growth Results in Focus

The Euro to Australian Dollar (EUR/AUD) exchange rate could be on track to end the week near its best levels in three years, but that also depends on how strong the Eurozone’s upcoming growth data is.

Friday will see the publication of some of this week’s most influential Eurozone stats, with German trade balance and industrial production data due, as well as the Eurozone’s Q2 Gross Domestic Product (GDP) growth results.

Following disappointing German factory orders data, investors could get an even better idea of how Germany’s economy is weathering US-EU trade tensions following Friday’s German trade and production data.

The Eurozone’s Q2 growth stats could be even more influential if they surprise investors. If the bloc’s growth rate is projected to have slowed even more than expected in Q2, European Central Bank (ECB) interest rate hike bets could slip and the Euro would weaken.

As Friday’s Australian home loans data is unlikely to be influential and US-China trade tensions are only expected to worsen, the Euro to Australian Dollar (EUR/AUD) exchange rate could hold its ground unless Eurozone data disappoints.