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Euro to Australian Dollar Exchange Rate Recovery Limited as Eurozone PMIs Print Mixed


Euro to Australian Dollar Exchange Rate Struggles to Climb Further on ‘Aussie’ Resilience

Since the middle of the week, the Euro to Australian Dollar (EUR/AUD) exchange rate has been recovering some of its weekly losses. However, as Eurozone data has been mixed this week, investors are hesitant to buy the Euro (EUR) too much.

EUR/AUD opened this week at the level of 1.6253, and due to a resurgent Australian Dollar (AUD) the pair slumped to hit a low of 1.6063 on Wednesday. This was the lowest EUR/AUD level in over a fortnight.

Towards the end of the week, EUR/AUD began to recover some of those losses. However, as of Friday morning EUR/AUD still only trended in the level of 1.6157, leaving the pair on track to lose around a cent this week overall.

The Euro’s recovery was limited, as the Eurozone’s latest key data has disappointed investors. Eurozone consumer confidence and German manufacturing PMIs both fell short of forecasts.

As risk-sentiment rises, investors have taken the opportunity to buy the embattled Australian Dollar back from its worst levels in profit taking, making the ‘Aussie’ one of this week’s strongest majors.

Euro (EUR) Exchange Rate Strength Limited as Eurozone Data Disappoints

The Euro’s movement has been fairly muted this week, amid a lack of notable or surprising news from the Eurozone driving the shared currency.

At the beginning of the week, the Eurozone’s latest inflation data met expectations and helped keep the Euro outlook steady.

Towards the end of the week though, Eurozone data has come in mixed which has limited market demand for the shared currency.

Euro investors were disappointed in Thursday’s Eurozone consumer confidence survey projections for September, which slumped from -1.9 to -2.9 rather than the expected -2.

This was followed on Friday, by the Eurozone’s September PMI projections from Markit.

Notably, Germany’s manufacturing PMI slowed from 55.9 to just 53.7, rather than the expected 55.7. As a result, the Eurozone’s overall manufacturing PMI projection came in at 53.3 rather than the forecast 54.4.

While Eurozone services activity actually beat forecasts, the weaker factory activity caused concern about how US trade protectionism could influence the Eurozone economy.

Australian Dollar (AUD) Exchange Rate on Track for Best Week in Months

Investors have been buying the Australian Dollar en masse this week, as the currency rebounds from its worst levels versus major rivals.

As US-China trade jitters have lightened slightly and markets begin to sell the safe haven US Dollar from its highs, embattled risky trade-correlated currencies like the Australian Dollar have been highly appealing.

The US and China did escalate trade tariff plans this week, but neither nation’s new tariffs were as severe as were previously hinted and speculated.

Hopes that US-China trade tensions could be softening slightly, or that the nations were becoming more willing to hold negotiations, bolstered demand for the fairly risky trade-correlated ‘Aussie’. Australia has strong trade links to both the US and China.

On top of the higher risk-sentiment, the Australian Dollar also benefitted towards the end of the week by news that the S&P had unexpectedly upgraded Australia’s credit rating, from AAA/negative to AAA/stable.

This was a strong indication that Australia’s economic outlook was strengthening. It dampened any remaining bets that the Reserve Bank of Australia (RBA) may need to cut Australian interest rates again.

Euro to Australian Dollar (EUR/AUD) Outlook to Be Influenced by Eurozone Confidence and Inflation

Next week’s Australian economic calendar is set to be relatively quiet, but as the Australian Dollar was driven largely by global risk-sentiment this week that much could continue.

If US trade tensions continue to lighten and the recovery rally in riskier assets persisted, the Australian Dollar could be in for another week of gains versus the Euro.

However, the Euro could find some support if upcoming Eurozone data is stronger than expected.

Notable Eurozone ecostats will be published throughout the week, mostly confidence figures for September.

Ifo’s German business sentiment survey data will be published on Monday, with French business confidence following on Tuesday. French consumer confidence will come in on Wednesday.

Late-week data is likely to be most influential though. German consumer confidence and the Eurozone’s final September confidence stats will be published on Thursday, as well as Germany’s September inflation projections.

Then, the week will be rounded off on Friday by French and Eurozone inflation projections, which could be highly influential for the Euro to Australian Dollar (EUR/AUD) exchange rate if they surprise investors.