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Euro Australian Dollar (EUR/AUD) Exchange Rate Benefits as US-China Relations Sour Further

US-China Tensions Offer Boost to Euro Australian Dollar (EUR/AUD) Exchange Rate

Escalating tensions between the US and China helped to lift the Euro to Australian Dollar (EUR/AUD) exchange rate as worries over the global trade outlook mounted.

Support for the Australian Dollar (AUD) also weakened in response to the latest commentary from Reserve Bank of Australia (RBA) Governor Philip Lowe.

As Lowe acknowledged the extent of the uncertainty surrounding the economic outlook investors remained wary of the potential for further monetary loosening measures.

A fresh deterioration in the latest Australian manufacturing PMI added to the bearish mood of AUD exchange rates, with the economy looking set for a weak second quarter performance.

On the other hand, solid improvement in the Eurozone services PMI encouraged the Euro (EUR) to trend higher against many of the majors on Thursday.

ECB Meeting Minutes Set to Provoke EUR/AUD Exchange Rate Volatility

Support for the Euro could weaken ahead of the weekend, however, if the European Central Bank’s (ECB) meeting minutes fail to encourage investor confidence.

If policymakers demonstrate a willingness to take further policy action in the months ahead the mood towards the single currency could sour.

While markets see little risk of interest rates seeing any fresh cut in the near future the prospect of further monetary loosening may still dent the appeal of the Euro.

March’s Spanish industrial orders data could also put a dampener on EUR exchange rates, with forecasts pointing towards a sharp decline in output on the year.

Even so, provided that Eurozone nations continue to move towards a normalisation of conditions and lifting of lockdown restrictions this may limit the risk of Euro losses.

Australian Dollar Remains Vulnerable to Growing Global Trade Tensions

As long as market risk appetite remains muted the Australian Dollar could struggle to find any particular rallying point.

If US-China relations fail to show signs of mellowing in the days ahead fears of a fresh trade spat could easily drive AUD exchange rates to shed further ground.

In the absence of any major Australian data releases support for the antipodean currency is likely to prove generally muted.

Looking ahead, the first quarter private capital expenditure report could see AUD exchange rates weaken further next week.

As forecasts point towards a fresh decline in expenditure on the quarter confidence in the economic outlook looks set to diminish.

Unless businesses show greater signs of resilience in the face of the Covid-19 crisis the EUR/AUD exchange rate could hold onto a stronger footing for some days to come.