The Australian Dollar Euro (AUD EUR) exchange rate fluctuated on Friday as markets reacted to a significant drop in the Eurozone’s trade surplus and a notable lack of Australian data releases.
AUD EUR Exchange Rate Jumps on Employment Surge
Although AUD/EUR exchange rate movement was limited on Friday, the pairing had previously jumped in response to surprisingly impressive Australian jobs data.
The Australian Bureau of Statistics (ABS) reported that employment increased by 61,000 (hitting 12.4 million) in November, significantly above the market forecast of a 19,000 rise.
This was the biggest monthly increase in Australian employment since October 2015, with markets also excited by the possibility that a reduction in labour market slack could propel wages higher in 2018.
In other news, iron ore (a major Australian export) reduced in price on Friday, with markets still concerned that construction in parts of China might be negatively affected by recent poor weather.
Richard Lu, Analyst at CRU Consultancy, Beijing, shared his thoughts:
‘Construction activities may gradually slow further in the northern part of China (due to adverse weather), so there’s less demand for construction steel’.
This likely contributed to the ‘Aussie’ Dollar’s fluctuations on Friday.
Euro Area Trade Surplus Narrows, Upward Potential of EUR Exchange Rates Limited
The Eurozone’s trade surplus narrowed year-on-year in October, falling to EUR 18.9 billion, down from the previous period’s EUR 19.2 billion and completely missing the expected EUR 24.6 billion.
This resulted from a massive 10.1% jump in imports, compared to a much softer rise in exports at 8.8%.
In other news, Thursday’s European Central Bank (ECB) rate meeting caused a slight stir in relation to the bank’s inflation forecast for the years ahead, with a disappointing 1.7% expected by 2020 – meaning a rate hike is still a long way off.
This may have limited the Euro’s upward potential on Friday, with other central banks like the Bank of England (BoE) and the US Federal Reserve planning a range of rate hikes in the years ahead.
Quiet Week Expected for EUR AUD Exchange Rate
The start of next week will likely be quite quiet for EUR AUD, with the only pertinent release being the Eurozone’s consumer price index figures.
The Euro will likely suffer a small dip in demand on this release, unless the figures surprise markets by being upwardly revised from previous estimates.
Notable ecostats for Australia, on the other hand, will only include the new motor vehicle sales data and the latest ANZ weekly consumer confidence index.
It should be noted, however, that if the US Fed fails to successfully pass its tax reform plan before Christmas then the ‘Aussie’ Dollar could steal some of its thunder; markets will be carefully watching for any updates on this front.