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Euro Australian Dollar (EUR/AUD) Exchange Rate Benefits From Weaker Australian Lending

Euro Australian Dollar (EUR/AUD) Exchange Rate Steady as Australian Lending Falls

A surprise contraction in Australian home loans helped to support the Euro to Australian Dollar (EUR/AUD) exchange rate, with Australian confidence showing signs of faltering.

Investment lending also saw a sharp contraction of -2.7% on the month in June, highlighting an increasing level of caution within the Australian economy.

This limited the appeal of the Australian Dollar (AUD) on Wednesday morning, in spite of the relatively positive nature of the latest comments from Reserve Bank of Australia (RBA) Governor Philip Lowe.

Annette Beacher, Chief Asia-Pacific Macro Strategist at TD Securities, commented:

‘The Governor has signalled that the RBA expects (1) GDP growth to remain ‘a bit above 3%’ this year and next; (2) the unemployment rate is expected to be a full-employment 5% by 2020; and (3) inflation is expected to return to mid-target 2½% by 2020. With all this revealed already, there can’t be much new news in Friday’s Statement on Monetary Policy.

‘The speech was typical upbeat Dr Lowe style: debt position of households is improving; population growth sets Australia up well; labour market is tightening; inflation target to be reached in two years; and concluding that the next move likely remains up for the cash rate.’

As the RBA looks set to leave monetary policy on hold for some time to come AUD exchange rates struggled to capitalise on Lowe’s speech.

EUR/AUD Exchange Rate Poised for Volatility Ahead of ECB Economic Bulletin

Ahead of Thursday’s European Central Bank (ECB) Economic Bulletin the Euro to Australian Dollar (EUR/AUD) exchange rate may struggle to gain any additional traction.

Investors do not expect to see any particular surprises in July’s Economic Bulletin, although the Euro (EUR) is likely to experience increased jitters tomorrow.

If the ECB shows greater signs of confidence in the outlook of the Eurozone economy, however, this could offer EUR exchange rates a solid rallying point.

While recent Eurozone data has proven largely underwhelming a more optimistic ECB outlook may improve the appeal of the single currency.

A dovish Bulletin would leave the Euro vulnerable to fresh losses, meanwhile.

Mounting US-China Trade Tensions to Benefit Euro Australian Dollar (EUR/AUD) Exchange Rate

Further volatility is likely in store for the Euro to Australian Dollar (EUR/AUD) exchange rate on the back of the latest Chinese consumer price index data.

If inflationary pressure within the Chinese economy continues to mount this could offer support to the risk-sensitive Australian Dollar.

On the other hand, evidence of weakening price pressures may encourage AUD exchange rates to trend lower across the board once again.

Global trade tensions are also likely to remain a key influence on the Australian Dollar in the days ahead.

Any further escalation of the US-China trade dispute could put a dampener on market risk appetite, offering a boost to the Euro to Australian Dollar (EUR/AUD) exchange rate.