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Euro Australian Dollar (EUR/AUD) Exchange Rate Sinks Despite RBA Rate Cut

EUR/AUD Exchange Rate Falls as RBA Takes Less Dovish Stance

The Euro Australian Dollar (EUR/AUD) exchange rate fell by -0.3% today and is currently trading around AU$1.6155 on the interbank market.

The Australian Dollar (AUD) edged higher against the Euro (EUR) despite the Reserve Bank of Australia (RBA) cutting its interest rates by a historic low of 1% today.

Philip Lowe, the Chief of the RBA, commented:

‘It will assist with faster progress in reducing unemployment and achieve more assured progress towards the inflation target… The outlook for the global economy remains reasonable. However, the uncertainty generated by the trade and technology disputes is affecting investment and means that the risks to the global economy are tilted to the downside.’

This watering down of further rate cuts, however, has provided some uplift for the ‘Aussie’ today, with traders seeing the dovish stance from the RBA turning towards a more ‘wait and see’ stance.

David Plank, the Head of Australian Economics at Australia & New Zealand Banking Group, said:

‘However, the uncertainty generated by the trade and technology disputes is affecting investment and means that the risks to the global economy are tilted to the downside.’

EUR/AUD Exchange Rate Eases as German Retails Fall

The Euro, meanwhile, fell following the printing of the German retail sales figures for May, which fell below the forecast increase of 0.5% to -0.6%.

Yearly figures, however, showed an increase to a better-than-expected 4.0%.

Stefan Hertel, a spokesperson for the German Retail Association (HDE), commented:

‘Sales increased but there was also an extra day of sales and if one adjusts for the extra sales day, then the figures are the same as in the previous year. Online trading remains the growth driver for the entire retail sector.’

Today also saw the Eurozone PPI figures for May fall below consensus from 2.6% to 1.6%.

As the Eurozone is showing signs of slowing down, along with the UK’s Brexit uncertainty rising as the Tory leadership race continues, many single currency traders are becoming increasingly jittery.

EUR/AUD Outlook: US-China Trade Talks to Remain in Focus

Euro traders will be looking ahead to tomorrow’s Eurozone Markit PMI composite figures for June, which are expected to hold steady at 52.1.

Tomorrow will also see the Eurozone’s building permits figures for May, which, however, are expected to improve.

‘Aussie’ investors, meanwhile, will be paying close attention to the US-China trade talks, and with any signs of a compromise emerging between the two superpowers, we would see risk-appetite increase, bolstering market optimism in the Australian Dollar.

The Euro, however would also likely benefit, and with the European currency negatively-correlated to the US Dollar, traders would flee from the safe-haven ‘Greenback’ and, as a result, bolster the EUR/AUD exchange rate.