Disappointing Australian retail sales data saw the Euro Australian Dollar exchange rate trending higher ahead of the weekend.
In the latest discouraging sign for the economy sales failed to rebound as forecast in September, instead stagnating on the month.
This suggests that domestic confidence is rather weaker than markets would like, boding ill for the wider outlook.
Even so, as Matthew Hassan, research analyst at Westpac, noted:
‘Stepping back, the picture from the report is an unambiguously bad one for retailers – who are cutting prices but finding no traction with volumes. The picture is not quite as bad for consumers who get some advantage from lower prices and do not look to be cutting back on consumption quite as sharply as feared.’
The mood towards the ‘Aussie’ also soured in response to a modest dip in October’s services PMI, which eased from 52.1 to 51.4.
All in all, this did not encourage hopes for Tuesday’s Reserve Bank of Australia (RBA) policy meeting, which is likely to see the central bank maintain its neutral stance.
Unless the RBA shows some signs of moving towards a monetary tightening bias the Australian Dollar is likely to remain on a weaker footing against its rivals in the near term.
However, a stronger showing from October’s TD Securities inflation forecast on Monday could still see AUD exchange rates recover some ground.
Catalan Worries Continue to Limit EUR Upside
The appeal of the Euro remained somewhat muted ahead of the weekend, meanwhile, as markets continued to watch developments in Spain.
As eight members of the deposed Catalan administration spent the night in jail there are concerns that tensions could flare up further.
With former president Carles Puigdemont refusing to return from Brussels he faces the prospect of a European arrest warrant, something which could only spark increased political unrest in Catalonia.
If the situation continues to deteriorate this could weigh heavily on the Euro, even though the threat of true Catalan independence appears to have receded significantly over recent days.
Confidence in the single currency could pick up on Monday, however, if the finalised raft of Eurozone services PMIs prove positive.
Any fresh signs of strength within the domestic economy are likely to boost the EUR AUD exchange rate, increasing the odds of growth in the Eurozone outstripping the US for the second year in a row.
On the other hand, if growth falls short of forecast this could leave the Euro vulnerable to further downside pressure.
Current Interbank EUR AUD Exchange Rates
At the time of writing, the Euro Australian Dollar exchange rate was making solid gains at 1.5194. Meanwhile, the Australian Dollar Euro exchange rate was slumped in the region of 0.6580.