EUR/AUD, or euro to Australian dollar, is relatively lightly traded currency pair. Both currencies tend to strengthen when economic growth is high and sell off during downturns. Thus big moves in this pair only occur if there is a specific event unfolding in the Eurozone or in Australia specifically. For example, EUR/AUD was fairly weak between 2010 and 2013 as debt problems in the Eurozone weakened the euro. On the other hand, the Australian dollar was very strong during this period thanks to strengthening commodity prices.
The euro is currently strengthening against all major currencies. The common currency is the strongest against the Japanese yen and the US dollar. Yesterday, the euro rebounded against the US dollar after finding buyers at the low end of our daily trading range (1.1510). The euro continues to strengthen today. Today's EUR/USD trading range remains 1.1510 - 1.1680.
Beyond finding buyers at recent lows, the euro is making gains today thanks to improving sentiment figures. While German manufacturing PMIs (a measure of sentiment) fell relative to previous monthly figures, composite PMIs were better than expected. This suggests that the outlook for the services sector is improving. A similar pattern can be seen in French PMI data. PMIs and other sentiment figures are a good forward-looking indicator, and tend to correlate well with future GDP growth figures.
Given the Eurozone's manufacturing and export-oriented economy, manufacturing PMIs tend to have a bigger influence on the currency. Between decelerating global growth and rising trade tensions, the outlook for Eurozone manufacturing is declining. German auto manufacturer stocks suffered significant declines yesterday after Daimler AG (the parent company of Mercedes Benz) issued a profit warning. While better-than-expected Eurozone services sentiment is welcome news for euro bulls, the ongoing deterioration in the more important manufacturing sector is a significant issue. Later today, we'll see manufacturing PMIs for the broader Eurozone. Our outlook on the euro remains bearish.
EUR/USD is up and trading above 1.1650. The euro is up against the yen, with EUR/JPY trading above 128.30. Finally, the euro is up slightly against the pound, with EUR/GBP above 0.8760.
|June 18||ECB President Draghi Speech|
|June 19||ECB President Draghi Speech|
|June 19||ECB Praet Speech|
|June 19||Eurozone Current Account S.A. APR||€28.4b||€32.0b|
|June 20||Germany PPI YoY MAY||2.7%||2%|
|June 20||ECB Lautenschläger Speech|
|June 20||ECB Cœuré Speech|
|June 20||ECB President Draghi Speech|
|June 21||France Business Confidence JUN||110||110|
|June 21||Eurozone Consumer Confidence Flash JUN||-0.5||0.2|
|June 22||Germany Markit Composite PMI Flash JUN||54.2||53.4|
|June 22||Germany Markit Mftg PMI Flash JUN||55.9||56.9|
|June 22||France GDP Growth Rate QoQ Final Q1||0.2%||0.7%|
|June 22||Eurozone Markit Composite PMI Flash JUN||54.1|
|June 22||Eurozone Markit Mftg PMI Flash JUN||55.5|
The Australian dollar is currently mixed. The Aussie is flat against the US dollar, while strengthening against the Japanese yen, euro and the British pound. Yesterday, the currency strengthened against the US dollar at the outset of the day, but ended the day lower. Today's AUD/USD trading range is 0.7350 - 0.7510. The pair is currently trading just above the low end of our indicated trading range.
Chinese equity markets have resumed selling off after yesterday's rebound. Both the Shanghai Composite and Hong Kong's Hang Seng Index are currently weaker. The Chinese offshore yuan (CNH) is also down sharply, with USD/CNH currently trading above 6.50. Given Australia's significant trading relationship with China, the currency tends to closely track developments in Chinese financial markets. Thanks to an ongoing deceleration in growth across emerging markets, the Australian dollar remains under pressure.
Looking at developments from Australia, RBA Governor Philip Lowe said that global inflation may be set to remain low for extended periods of time. Lowe also highlighted the unknown risks associated with prolonged quantitative easing. Recent communications from the RBA suggest that the Bank remains firmly in neutral.
In politics, Prime Minister Turnbull has claimed a major victory after passing income tax cuts through Australia's Senate. The news had a limited impact on the currency as the Australian dollar remains weighed down by concerns regarding the future outlook. Our outlook on the Australian dollar remains bearish.
AUD/USD is down slightly and trading just above 0.7350. EUR/AUD is down and trading above 1.5680. GBP/AUD is down slightly and trading above 1.7830. AUD/JPY is up slightly, and trading above 81.20.
|June 19||House Price Index YoY Q1||2%||5.0%|
|June 19||RBA Meeting Minutes|
|June 20||RBA Gov Lowe Speech|
|June 21||Westpac Leading Index MoM MAY||0.2%|
|June 21||RBA Bulletin|
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