Improved Eurozone Services PMIs Fail to Shore up Euro Australian Dollar (EUR/AUD) Exchange Rate
A better-than-expected raft of Eurozone services PMIs was not enough to prevent the Euro to Australian Dollar (EUR/AUD) exchange rate from slumping this morning.
While the service sector showed fresh signs of expansion across the Eurozone the Euro (EUR) struggled to capitalise on this positive data.
The resurgence in service sector growth failed to outweigh Monday’s underwhelming manufacturing PMIs, with confidence in the underlying health of the Eurozone economy still lacking.
As Chris Williamson, Chief Business Economist at IHS Markit, commented:
‘The final Eurozone PMI for March confirms the sluggish end to the first quarter, with business growth ebbing to one of the most lethargic rates seen since 2014.
‘Only at the turn of the year, when business was hit by headwinds such as widespread ‘yellow vest’ protests in France and an auto sector struggling with new emissions regulations, has growth been slower over the past four years.’
Global Trade Optimism Boosts Australian Dollar (AUD) Demand
Although global trade tensions showed signs of easing, with fresh signs of progress towards a US-China trade agreement, this only put greater pressure on the EUR/AUD exchange rate.
While the Eurozone economy stands to benefit from a general improvement in global trade and growth the news also encouraged investors to pile into the Australian Dollar (AUD) once again.
The risk-sensitive Australian Dollar trended higher across the board as markets bet on an imminent breakthrough in trade talks between US and Chinese officials.
A surprise widening of the Australian trade surplus also lent support to AUD exchange rates today, with this improvement in trade conditions boding well for domestic growth.
February’s retail sales data painted a similarly positive picture as sales grew 0.8% on the month, showing a solid acceleration on January’s figures.
Dovish ECB Minutes Set to Weigh on Euro (EUR) Exchange Rates
The mood towards the Euro could deteriorate further on Thursday if the latest set of European Central Bank (ECB) meeting minutes prove dovish in nature.
Fresh evidence that the central bank is set to leave interest rates at their current record low for the foreseeable future would leave EUR exchange rates exposed to additional selling pressure.
With recent Eurozone data offering little cause for confidence ECB policymakers look likely to signal their intent to maintain a looser level of monetary policy for longer.
Unless the minutes show signs of support for a return to a monetary tightening bias the EUR/AUD exchange rate looks set to lose fresh ground in the wake of the release.
Further pressure could be in store for the single currency if February’s German factory orders show another month of contraction, meanwhile.
Without signs of resilience from the Eurozone’s powerhouse economy the Euro could struggle to find any particular degree of support in the near term.