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Euro Scrapes Gains versus Australian Dollar despite Drop in Trade Surplus

The Euro is on uncertain form today, making only minor gains versus the Australian Dollar thanks to a thin supply of economic data all round.

The EUR AUD exchange rate has risen 0.1% to 1.5376.

Recent European Central Bank Caution Weighs on Euro (EUR) Exchange Rates

Yesterday’s European Central Bank (ECB) monetary policy announcements continue to weigh on the Euro, keeping it from making a more solid recovery versus the Australian Dollar than the 0.1% advance seen already.

The bank revised its economic growth forecasts higher in the wake of robust data over the past few weeks, but markets were disappointed to see projections for inflation remain soft.

It seems that the Governing Council has no expectation that the economic recovery will translate into increased price pressures, which in turn lowers the odds of a near-term end to quantitative easing or a hike in borrowing costs.

Meanwhile, the latest Eurozone trade balance figures have disappointed, showing a sharp decline in the surplus recorded in September.

According to figures for October, the trade surplus fell from an upwardly-revised €24.5 billion to a seasonally-adjusted €19 billion; a significant disappointment compared to forecasts of €24.3 billion.

On a non-seasonally adjusted basis, the trade surplus fell from €26.4 billion to €18.9 billion.

This was thanks to a 10.1% rise in import growth year-on-year to €168.9 billion, compared to an 8.8% rise in exports to an annualised €187.9 billion.

Lack of Australian Data Keeps AUD on Soft Form

The Australian Dollar has been left on rudderless form today, allowing it to make gains against weaker currencies but otherwise drift lower as its peers strengthen.

This has resulted in a -0.2% decline for AUD EUR exchange rates, as markets take the opportunity to lock in profits following appreciation on yesterday’s strong Australian jobs data.

The fact that the Australian Dollar Euro exchange rate this morning reached a one-month high of 0.6524 further gave markets an incentive to cash out of the ‘Aussie’.

Quiet Start to Next Week Forecast for EUR AUD Exchange Rates

There is no Eurozone or Australian data left for release this week, leaving markets thinking slightly more long term when taking up or adjusting positions on the EUR AUD exchange rate today.

In all likelihood, however, it will be a quiet start to next week as well, given that the only data from the currency bloc will consist of finalised consumer price index figures for November,

Unless these figures are revised from earlier estimates, the Euro is unlikely to react particularly strongly to the results.

Meanwhile, the Australian data docket contains only new motor vehicle sales data for November and the latest ANZ Roy Morgan weekly consumer confidence index.

There is potential for turbulence from external sources if Republicans in the US make progress on finalising their tax reform bill.

This would move President Trump one step closer to enacting his campaign promise of radically reforming the US tax system, boosting the US Dollar; whether this weighs more on the Euro or the Australian Dollar remains to be seen.