German Factory Orders Rebound Shores up Euro Australian Dollar (EUR/AUD) Exchange Rate
An unexpectedly sharp rebound in German factory orders helped to put a floor under the Euro to Australian Dollar (EUR/AUD) exchange rate this morning.
Orders surged 1.3% on the month in September, reversing the previous month’s -0.4% contraction and lifting demand for the Euro (EUR).
Concerns for the Eurozone’s powerhouse economy persist, however, thanks to lingering global trade tensions and other recent signs of a slowdown.
Market predictions anticipate a lacklustre second half of 2019 for the German economy which will limit the potential for Euro gains.
A solid uptick in Eurozone retail sales also offered a boost for EUR exchange rates, with consumer spending resilient in the face of wider economic worries.
Australian Dollar (AUD) Exchange Rates Vulnerable to Trade Deterioration
In the wake of the Reserve Bank of Australia’s (RBA) less dovish policy meeting on Tuesday, the Australian Dollar (AUD) has remained on a largely bullish run.
Interest rates looking set to remain on hold for some months to come so the downside potential for AUD exchange rates appears limited.
However, support for the Australian Dollar could falter on Thursday as forecasts point towards a narrowing of the Australian trade surplus during September.
If this narrowed from 5.9 billion to 5.0 billion as anticipated this could see investors sell out of the antipodean currency as reduced excess reserves limit the country’s ability to buy overseas assets.
Evidence that ongoing trade tensions between the US and China are weighing on the Australian economy may offer the EUR/AUD exchange rate a solid rallying point.
Another monthly decline in export volumes could easily undermine confidence in the underlying health of the Australian economy, leaving AUD vulnerable to selling pressure.
The strength of AUD currency rates may also falter if October’s Australian construction PMI falls deeper into contraction territory.
Euro (EUR) Looks for Support in German Industry
Confidence in the underlying strength of the German economy could see a further improvement if September’s industrial production data delivers another monthly improvement.
Evidence that production continued to recover at the end of the third quarter, despite an underwhelming manufacturing PMI, may offer the Euro a strong boost against its rivals.
However, as forecasts point towards a modest monthly deterioration of -0.4% this could place renewed pressure on the EUR/AUD exchange rate.
If the Eurozone’s powerhouse economy still appears on track to enter a recession in the third quarter markets are unlikely to favour the single currency.
Even so, fresh signs of progress towards a preliminary US-China trade agreement could offer some degree of support to EUR exchange rates in the near term.
As long as the US still looks set to implement tariffs on a number of EU exports, however, fears of a prolonged economic slowdown could weigh heavily on the Euro.