Euro to Australian Dollar Exchange Rates Edge Away from Worst Levels as Eurozone Core Inflation Rises
Despite signs that Eurozone growth is slowing amid US trade protectionism concerns, the Euro to Australian Dollar (EUR/AUD) exchange rate was supported by Eurozone inflation data on Wednesday.
Since opening this week at the level of 1.6088, EUR/AUD has fallen over half a cent. EUR/AUD briefly touched a low of 1.5957 overnight, the pair’s worst level in over two months.
At the time of writing on Wednesday, EUR/AUD trends near the level of 1.60 again. EUR/AUD has recovered slightly from its worst levels amid the latest Eurozone and Australian inflation reports.
Demand for the Australian Dollar (AUD) was limited following news that Australian inflation had slowed as analysts expected.
Meanwhile though, the Eurozone’s latest core inflation rate actually beat forecasts and this made the Euro (EUR) more appealing following this week’s more underwhelming Eurozone stats.
Euro (EUR) Exchange Rates Avoid Further Losses as Eurozone Inflation Edges Higher
The Euro had seen poor performance for much of the week so far, amid underwhelming Eurozone ecostats as well as concerning developments in Eurozone politics.
For example, Tuesday saw the publication of Eurozone confidence data from October and Eurozone growth projections for Q3, most of which fell short of forecasts.
However, the Eurozone’s overall October Consumer Price Index (CPI) inflation rate projection was published today.
While the normal print only edged higher from 2.1% to 2.2% as expected, the core inflation rate unexpectedly rose from 0.9% to 1.1% rather than the expected 1.0%.
This indicated that the Eurozone’s price pressures were becoming more sustained, in news that may offer some relief to the European Central Bank (ECB).
Still, Germany’s September retail sales results today were disappointing and are likely to worsen fears about slowing Eurozone growth towards the end of the year. If Eurozone growth continues to slow, the ECB will have other reasons to be cautious.
On top of this, Euro investors remain anxious about a lack of developments regarding the issue of Italy’s budget, and Italy’s tensions with the EU.
Australian Dollar (AUD) Rally Slows as Australian Inflation Slows
Investors bought the Australian Dollar on Tuesday in reaction to fresh hopes regarding trade talks between the US and China.
As China is Australia’s biggest trade partner and Australia also has strong trade links to the US, US-China trade tensions have been a major cause of Australian Dollar weakness this year.
However, the Australian Dollar’s Tuesday rally was short-lived, as Australia’s key Wednesday data made investors hesitant to keep buying it.
Wednesday’s Asian session saw the publication of Australia’s Q3 Consumer Price Index (CPI) report, which confirmed that Australian price pressures were slowing.
As analysts forecast, Australian inflation remained at 0.4% quarter-on-quarter. The year-on-year inflation rate slowed from 2.1% to 1.9% as forecast.
This dampened market hopes for inflation to beat expectations and put pressure on the Reserve Bank of Australia (RBA) to tighten Australian monetary policy.
The RBA has had little reason to take a more hawkish stance, as Australian inflation has been hovering around the lower band of the RBA’s inflation targets and so far shows little sign of surging higher.
Euro to Australian Dollar (EUR/AUD) Exchange Rate Investors Await Australian Trade Report
With the Euro to Australian Dollar’s movement mixed this week so far, investors will continue to keep an eye on upcoming data and shifts in risk-sentiment in the coming days.
Thursday will see the publication of some of this week’s most influential Australian ecostats, in the form of September’s Australian trade balance report.
As Australia is a trade heavy nation, the Australian Dollar could be strongly influenced by the trade report if it surprises.
For example, if the export and trade balance figures come in higher than expected the Australian Dollar could strengthen as it would indicate that Australia’s economy is weathering US-China trade jitters.
Of course, weaker Australian trade data would have the opposite effect.
Friday’s data may be influential too. Australian retail sales stats data and the Eurozone’s October manufacturing PMI figures will be published.
On top of this, the Euro to Australian Dollar (EUR/AUD) exchange rate will of course continue to be influenced by Eurozone political developments and shifts in global risk-sentiment.