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Euro to Australian Dollar Exchange Rate Falls as German Economy Shrinks by -5% in 2020

Euro Suffers Despite Growing Confidence in the Eurozone’s Economic Recovery for 2021

The Euro to Australian Dollar (EUR/AUD) exchange rate fell by -0.3% today, with the pairing currently trading around AU$1.56.

The Euro struggled today following the release of the latest German GDP data for the final quarter of 2021.

Germany’s economy fell by -5% last year – its worst since the financial crisis.

However, Eurozone markets are not too concerned about Germany’s economy, which has handled the Covid-19 crisis relatively well.

Nonetheless, Deutsche Bank analysts warned:

‘We keep our +4.5% GDP forecast for 2021. While the economy seems to have performed better towards the end of last year, as suggested by the smaller-than-expected annual decline in 2020, the outlook for Q1 2021 has become more clouded, given the extension of the lockdown until the end of January and – more importantly – indications by key politicians that at least some of the measures could be extended until Easter, given the unabated pandemic.’

A rising number of Covid-19 infections throughout the Eurozone has, however, limited the appeal of the single currency.

Australian Dollar Rises on Strong Chinese Trade Data

The Australian Dollar has been bolstered by strong Chinese trade data today, with China – the world’s second largest economy – recording a surge of exports that continued in December.

Louis Kujis, the head of Asia economics at Oxford Economics, said:

‘After having recovered from its own Covid-19 crisis, China was open for business when the pandemic triggered huge demand in the US (and other countries) for Covid-19 related goods.’

As a result, demand for the risk-sensitive ‘Aussie’ has increase, owing to China being Australia’s largest trading partner.

AUD has also benefited from a relative calm in US political uncertainty after President Donald Trump was impeached for a second time.

However, now that the transition is due to take place, with President-elect Joe Biden due to enter the White House, markets are feeling more optimistic.

EUR/AUD Outlook: Australian Home Loans Data in Focus

Australian Dollar traders will be awaiting tomorrow’s Home Loans data for November.

Any signs of improvement in Australia’s economy would be AUD-positive.

However, risk sentiment will continue to drive the AUD/EUR exchange rate this week.

As a result, we could see the Australian Dollar begin to suffer if the global Covid-19 situation appears to worsen.

The Euro (EUR) could continue to fall, however, if the Eurozone’s Covid-19 infection rate continues to increase.