EUR/AUD Exchange Rate Improves as RBA Rate Cut Fears Increase
The Euro Australian Dollar (EUR/AUD) exchange rate edged higher today, leaving the pairing fluctuating around AU$1.5965.
The Australian Dollar (AUD) fell slightly against the Euro (EUR) following last night’s release of the flash Australian Commonwealth Bank Manufacturing PMI figure for July.
Slipping closer to contraction, this eased from 52 to 51.4.
The flash services PMI figures, meanwhile, also eased from 52.6 to 51.9.
The Commonwealth Bank said in its statement:
‘Slower growth fed through to staffing levels, which decreased for the first time in three months. Overall the ‘flash’ PMI does suggest business activity should continue to expand in Q3. A combination of monetary policy stimulus, tax rebates currently hitting household bank accounts and early signs of a recovery in the housing market should see the Australian economy stabilise, if not pick up over the [second half of] 2019.’
‘Aussie’ traders are also becoming more dovish following comments from Westpac’s Chief Economist, Bill Evans, who said that the Reserve Bank of Australia will cut interest rates by 0.5%.
‘By October, we expect that the path of the unemployment rate will be sufficiently contrary to the RBA’s plans that they will have appropriate justification to ease policy a little earlier than we had previously expected.’
EUR/AUD Exchange Rate Rises despite Poor Manufacturing Weighing on Eurozone PMIs
The Euro (EUR) has continued to struggle against many of its competitors, however, following today’s printing of the flash Eurozone’s PMI Composite figures for July.
Falling nearer contraction territory, these fell below forecast from 52.2 to 51.5.
These were dragged down by German’s flash Markit Manufacturing PMI figure, which fell deeper into contraction at 43.1.
Chris Williamson, the Chief Business Economist at IHS Markit, commented:
‘The manufacturing sector has become an increasing cause for concern. Geopolitical worries, Brexit, growing trade frictions and the deteriorating performance of the autos sector in particular has pushed manufacturing into a deeper downturn.’
Euro traders have become increasingly jittery ahead of tomorrow’s economic policy statement from the European Central Bank (ECB), which is expected to be dovish following poor Eurozone economic data.
EUR/AUD Outlook: ECB Rate Statement in Focus
Australian Dollar traders will be looking ahead to tomorrow’s speech by the Governor of the RBA.
Any further signs of dovishness surrounding the Australian economy could see the ‘Aussie’ fall further against the Euro.
Tomorrow will also see the German IFO business climate figures for July.
However, as tomorrow’s interest rate decision from the ECB will be in focus, it is unlikely that the Euro will hold on to much of today’s gains.
As expectations are running high that the ECB’s monetary policy statement will contain reasons for stimulus and potential rate cuts going forward, we are likely to see the EUR/AUD exchange rate begin to fall.