Australian Dollar to Euro Exchange Rates Firms Higher as Eurozone Inflation Disappoints
Despite market anxiety about how trade talks between the US and China could influence global trade, the Australian Dollar to Euro (AUD/EUR) exchange rate has still seen solid gains this week so far.
After opening this week at the level of 0.6249, AUD/EUR briefly dipped to a low of 0.6228 and has since jumped. During Thursday’s European session, AUD/EUR trended near a two-week-high of 0.6288.
The Australian Dollar (AUD) was able to capitalise on Euro (EUR) weakness, as the latest Eurozone data continued to indicate that the European Central Bank (ECB) was unlikely to change its cautious stance on Eurozone monetary policy any time soon.
This week has seen the publication of inflation projections from various Eurozone member states and the bloc overall. Much of the week’s data has fallen short, indicating that Eurozone price pressures remain subdued.
Euro (EUR) Exchange Rates Sold as Eurozone Inflation Falls Short of Forecasts
Thursday’s Eurozone Consumer Price Index (CPI) results fell short of analysts in both yearly prints, concerning investors who had been hoping for signs of stronger price pressures in the Eurozone.
Instead, the data indicated that price pressures remained subdued – even more subdued than expected.
April’s year-on-year inflation projection was forecast to remain at 1.3%, but instead slipped to 1.2%. The core inflation figure was even more disappointing, falling from 1% to just 0.7% and below the expected slip to 0.9%.
Due to the disappointing inflation results, some analysts are even saying that a rate hike from the European Central Bank (ECB) is now looking unlikely. According to Michael Hewson from CMC Markets:
‘It’s certainly going to make for an interesting discussion at the ECB governing council,
Rate rise expectations will be pushed back and 2019 is now very unlikely’
While this week’s other Eurozone data, including growth projections and manufacturing PMIs, were relatively solid, these did little to support Euro trade.
Australian Dollar (AUD) Exchange Rates Supported as Domestic Data Impresses
Markets may be anxious during the new formal trade talks between the US and China, but this has seemingly had only a limited downside effect on the Australian Dollar.
Thanks to some of Australia’s best domestic ecostats in some time, the Australian Dollar saw firmer support on Thursday.
Thursday’s Asian session saw the publication of Australia’s March trade balance results and building permits, as well as April’s services PMI from AiG.
Australia’s trade report was particularly impressive, unexpectedly rising to a surplus of A$1.53b rather than the expected A$0.65b. The previous figure was revised higher too, from A$0.825b to A$1.35b.
The trade surplus was bolstered by surprisingly strong exports and imports figures, which both printed at 1%.
Building permits beat 1% forecasts by rising from -4.2% to 2.6%, while Australia’s April services PMI slipped from 56.9 to a still respectable 55.2.
Australian Dollar to Euro (AUD/EUR) Forecast: Eurozone PMIs and Retail Stats Ahead
The Australian Dollar to Euro (AUD/EUR) exchange rate is likely to continue to be driven by trade developments between the US and China, but a slew of Eurozone data on Friday could influence the pair too.
While not as influential as the growth and inflation results that came in earlier in the week, the Eurozone’s final April PMIs from Markit, and the bloc’s March retail sales results, could still drive Euro movement.
The Eurozone’s final composite PMI for April is forecast to have remained at 55.2. As the bloc’s manufacturing PMI beat forecasts earlier in the week, this could support the Euro if it impresses.
However, the Eurozone data would need to be particularly impressive for the Euro to strengthen amid concerns about recent low Eurozone inflation.
The Australian Dollar is more likely to be influenced by trade developments.
Failing that though, Friday’s Reserve Bank of Australia (RBA) policy statement or next week’s confidence and retail sales figures could influence the Australian Dollar to Euro (AUD/EUR) exchange rate.