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Euro to Australian Dollar Exchange Rate Slips on Signs China Could Stimulate Chinese Growth

Euro to Australian Dollar Exchange Rate Gives Back Monday’s Gain Attempts

After advancing at the beginning of the week, the Euro to Australian Dollar (EUR/AUD) exchange rate slipped back this morning as market demand for the risky trade-correlated Australian Dollar (AUD) rebounded slightly.

Stronger risk-sentiment dragged EUR/AUD down last week, from the level of 1.6011 to 1.5887 throughout the week. EUR/AUD briefly edged higher yesterday, but at the time of writing this morning was trending closer to the week’s opening levels again.

Market demand for the Euro (EUR) has been limited due to a lack of impressive or strong Eurozone data in recent sessions.

This has made it difficult for the shared currency to hold its ground against the Australian Dollar, which has been more influenced by global risk-sentiment.

At the beginning of the week, poor Chinese trade data and a stronger US Dollar (USD) dented market appetite for risky trade-correlated currencies like the ‘Aussie’.

The Australian Dollar saw stronger demand today amid hopes that China would stimulate its economy and boost growth. As China is Australia’s biggest trade partner, the ‘Aussie’ is often used as a proxy for Chinese economic sentiment.

Euro (EUR) Exchange Rates Unappealing amid Lack of Strong Support

Eurozone data published at the beginning of the week dented the market’s Eurozone outlook and has limited market demand for the Euro since yesterday.

Eurozone industrial production results from November was forecast to contract in both monthly and yearly prints, but the actual contractions came in much worse than expected.

The yearly industrial production figure in particular plummeted from 1.2% to -3.3% rather than the expected -2.3%. The data worsened market concerns about the Eurozone economic outlook and caused European Central Bank (ECB) interest rate hike bets to fall.

The data meant investors had little reason to keep buying the Euro once the Australian Dollar became more appealing again.

Tuesday’s Eurozone data did little to change Euro sentiment. France’s December inflation rate stats and Germany’s full 2018 Gross Domestic Product (GDP) growth rate all met expectations and did little to influence the outlook for the Eurozone or the shared currency.

Australian Dollar (AUD) Exchange Rates Bolstered by Chinese Stimulus Hopes

Most of this week’s movement so far has been caused by shifts in market risk-sentiment. At the beginning of the week, poor Chinese trade data worsened market fears about how global trade tensions may be weakening the world’s second biggest economy.

Concerns about China’s economy weighed on the Australian Dollar, which is often correlated to Chinese economic sentiment.

This was also the reason behind the Australian Dollar’s stronger appeal on Tuesday. Beijing announced plans to cut taxes and boost spending in order to stimulate China’s economy, with the nation’s central bank also promising to keep liquidity relatively ample.

According to CommSec Markets Analyst James Tao:

‘(China is) looking to boost the market — and they’ll be doing a little bit more a bit later in the month, so it’s certainly a good start,

It’s a lot more upbeat and an optimistic tone coming through after yesterday’s trade figures, more conducive for our market to prosper.’

Euro to Australian Dollar (EUR/AUD) Exchange Rate Investors Await Eurozone Inflation Stats

Demand for the Euro is limited this week so far, amid a lack of strong support or reasons to buy the shared currency. As a result, investors may find the Euro more appealing if upcoming Eurozone data beats expectations.

Germany’s December Consumer Price Index (CPI) inflation rate results will be published on Wednesday, with the Eurozone’s overall December inflation rate due on Thursday.

If Eurozone inflation stats beat expectations, it could make investors more confident in Eurozone price pressures and bolster European Central Bank (ECB) interest rate hike bets. This would of course make the Euro more appealing.

Of course, if the data meets expectations or falls short, investors will have little reason to buy the Euro. Instead, investors will focus on the strength of the Australian Dollar and market risk-sentiment.

If investors are more willing to take risks later in the week, the Euro to Australian Dollar (EUR/AUD) exchange rate may be in for further losses in the coming sessions.