Australian Private Sector Credit Falls Short – AUD Exchange Rates Waver
The Australian Dollar Euro (AUD/EUR) exchange rate fluctuated on Wednesday, movements largely driven by mixed data releases for both Australia and the bloc.
On the Australian front, the Reserve Bank of Australia (RBA) revealed that total credit in the private sector increased at a slower pace than expected in January, printing at 4.9% year-on-year and 0.3% month-on-month.
These readings were on par with the previous period, but below the forecasts of 5.0% and 0.4% respectively.
This also included a drop in credit for businesses (-0.1% from 0.1%); a poor reflection on the Australian private sector.
Analysts at TDS noted:
‘Housing credit also grew at the slowest rate in annual terms since May 2014. (…) Outside of housing, credit to businesses dropped by 0.1%, the first decline since February last year. Outside of owner occupier demand for credit, there is little evidence elsewhere for a demand in credit’.
This marked a rather subdued start to 2018 and limited demand for the Australian Dollar.
Euro (EUR) Exchange Rates Prove Volatile as Eurozone Inflation Sinks
Euro (EUR) exchange rates encountered volatility on Wednesday, moving in reaction to a disappointing drop in the bloc’s inflation estimates for February and an upbeat German unemployment print.
According to Eurostat, inflation in the bloc fell to its lowest level in over a year in February, with the headline year-on-year reading estimated at 1.2%, down from the previous period’s 1.3%.
This was largely due to a decline in energy prices and a pull-back in food prices, similar to Germany’s figures yesterday.
This is, of course, an even greater distance from the European Central Bank’s (ECB) target of 2%, though markets have already largely priced in the likelihood that the central bank will not be adjusting its monetary policy for some time.
In other news Germany’s economy continues to fire on all cylinders it would seem, with their unemployment rate holding at historic lows of 5.4% in February and the number of people out of work falling by 22,000.
This underlined the fact that the German labour market continues to develop positively, with demand for workers within Germany remains at high levels.
Australian Dollar Euro (AUD/EUR) Exchange Rate Forecast: Australian Manufacturing Figures Imminent
The Australian Dollar Euro (AUD/EUR) exchange rate could see additional movement this evening on the release of Australia’s AiG performance of manufacturing index, with markets expecting a contraction in the reading from 58.7 to 57.
If this occurs then it would be the end of a massive 16-month run of expansion within the sector (the longest growth run since 2005), a prospect that could leave the ‘Aussie’ Dollar floundering.
In other news the Euro will see even more movement as we move into March with Germany’s Social Democrats (SPD) due to vote on the renewal of a coalition deal with Chancellor Angela Merkel’s Conservatives (CDU).
Many within the SPD are against the prospect of working alongside the CDU again after the recent disappointing election defeat, but Merkel’s concessions (particularly in regards to ceding the Ministry of Foreign Affairs and Finance) could be enough to clinch the deal.
This would appease the markets and likely send the Euro higher, as it would remove the possibility of Germany returning to the polls (an event that would include a substantial amount of uncertainty).