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 steady against all major currencies. Yesterday, the euro rebounded against the US dollar after making four consecutive lower-lows earlier this week. After the euro moved into oversold territory, we have been calling for a short-term rebound. Today's EUR/USD trading range is 1.130 - 1.1530.
There are no significant fundamental developments related to the euro today. Similar to what we saw yesterday, euro trading is mostly a function of risk sentiment. As currency markets are mostly directionless today, the euro is also unchanged.
Turning to economic data, we'll see final inflation figures for the Eurozone later today. As the numbers are usually in line with the initial estimate, the data is unlikely to have a significant impact on the currency. In other news, Bundesbank Beermann's speech did not address monetary policy. Thanks to slowing growth and peaking inflation, the Eurozone's economy is likely to continue weakening. Our outlook on the euro remains bearish.
|August 14||Germany GDP Growth Rate YoY Flash Q2||2%||2.1%|
|August 14||Germany Harmonised Inflation Rate YoY Final JUL||2.1%||2.1%|
|August 14||Germany Inflation Rate YoY Final JUL||2%||2.1%|
|August 14||Eurozone GDP Growth Rate YoY 2nd Est Q2||2.2%||2.5%|
|August 14||Eurozone Industrial Production YoY JUN||2.5%||2.6%|
|August 14||Eurozone ZEW Economic Sentiment Index AUG||-11.1||-18.7|
|August 14||Germany ZEW Economic Sentiment Index AUG||-13.7||-24.7|
|August 15||Bundesbank Beermann Speech|
|August 16||Germany Wholesale Prices YoY JUL||3.5%||3.4%|
|August 16||Eurozone Balance of Trade JUN||€16.5B|
|August 17||Eurozone Current Account JUN||€4.6B|
|August 17||Eurozone Core Inflation Rate YoY Final JUL||0.9%|
|August 17||Eurozone Inflation Rate YoY Final JUL||2%|
The Australian dollar is currently strengthening against all major currencies except the euro. Yesterday, the aussie ended the day higher against the US dollar. Following the recent sell-off, the currency had moved into oversold territory (while the US dollar looked overbought). However, the Australian dollar's recent recovery has been fairly limited. Today's AUD/USD trading range is 0.720 - 0.7340.
Yesterday, the Australian dollar was the strongest major currency. Thanks to improving risk sentiment, emerging market currencies were stronger and commodity prices were higher. This provided a welcome boost to the aussie after a big selloff in recent history.
Looking at developments in China, Reuters reported that the People's Bank of China has banned banks in its free trade zones from certain lending activities in order to ease pressure on the yuan in offshore markets. The restrictions aim to prevent commercial banks from using some interbank accounts to deposit or lend yuan offshore, tightening offshore yuan liquidity and making it more expensive to short the currency. The move aims to support the Chinese yuan which has weakened against the US dollar for nine straight weeks. Because of Australia's significant trading relationship with China, the Australian dollar is heavily influenced by developments in China.
Turning to local news, in a speech today RBA Governor Philip Lowe talked down the Australian dollar. Lowe said that a lower further modest depreciation in the currency would be helpful to boost inflation and stimulate growth. A lower currency generally leads to higher prices of imports into the country, which puts upward pressure on inflation. It also makes exports out of the country cheaper, which helps to boost the economy. Our outlook for the Australian dollar remains bearish.
AUD/USD is up and trading just above 0.7280. EUR/AUD is flat and trading above 1.5660. GBP/AUD is down and trading above 1.7460. AUD/JPY is up slightly, and trading above 80.60.
|August 14||NAB Business Confidence JUL||7||6|
|August 15||Westpac Consumer Confidence Change AUG||-2.3%||3.9%|
|August 15||Westpac Consumer Confidence Index AUG||103.6||106.1|
|August 15||Wage Price Index YoY Q2||2.1%||2.1%|
|August 16||Employment Change JUL||-3.9K||58.3K|
|August 16||Participation Rate JUL||65.5%||65.6%|
|August 16||Unemployment Rate JUL||5.3%||5.4%|
|August 17||RBA Gov Lowe Speech|
|August 17||RBA Ellis Speech|
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