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Euro Australian Dollar (EUR/AUD) Exchange Rate Slumps, as Chinese Industrial Production Soars

Upbeat Chinese Production Figures Drive EUR/AUD Lower

The Euro Australian Dollar (EUR/AUD) exchange rate is on the retreat this morning as China’s latest industrial production figures help to bolster the appeal of the ‘Aussie’.

At the time of writing EUR/AUD has plummeted almost 0.6%, eliminating most of yesterday’s gains and leaving the pairing close to this week’s opening levels.

Australian Dollar (AUD) Rises as Chinese Data Impresses

The Australian Dollar is racing higher against the Euro this morning, recouping most of Tuesday’s losses as AUD investors welcome the latest production figures from China.

According to data published by China’s National Bureau of Statistics, industrial production skyrocketed from 6.2% to 7.2% at the start of 2018, easily beating expectations that output would slow to 6.1%.

This was the fast pace of growth since June as appeared to be mainly driven by rising steel, cement and coal output.

The figures prompted a strong rebound in AUD/EUR, with investors flocking to the ‘Aussie’ on expectations that the growth in Chinese production will also bode well for the Australian economy.

China is a key trading partner for Australia, and investors are hopeful that the increased output in China will see demand for Australian exports rise accordingly.

Dovish Draghi Speech Drags on Euro (EUR)

Meanwhile the Euro remained on the back foot at the start of the European session this morning following a speech by European Central Bank (ECB) President, Mario Draghi.

In a broadly dovish speech Draghi said that the ECB wants to see more evidence that inflation is picking up before beginning to tighten its monetary policy.

Draghi suggested that more patience would be needed to allow inflation pressures to build as he suggested that wage growth is nearing the point at which it will sustain a modest rate on inflation over the coming years.

Draghi said in his speech today;

‘The key issues we need to examine are wage dynamics, their pass-through to prices, and the possible risks to the inflation outlook.

‘The anchors for wage formation are gradually becoming more aligned with our inflation objective.’

EUR/AUD Forecast: RBA Bulletin to Weigh on the ‘Aussie’

Looking ahead the EUR/AUD exchange rate may be able to bounce back later this evening as the Reserve Bank of Australia (RBA) publishes its latest quarterly bulletin.

With the RBA’s most recent policy statements being cautious in tone, it is likely that March’s bulletin will maintain the bank’s cautious outlook, something that will likely drag on the Australian Dollar.

Meanwhile EUR investors are likely to turn their attention to the final release of the Eurozone’s latest CPI figures, which are expected to confirm that inflation slowed in February.

This may see the Euro move lower as it likely dents any hopes that the ECB could raise interest rates later this year.