While both the Australian Dollar and Euro have seen stronger demand this week amid lighter trade jitters and a weaker US Dollar (USD), the Australian Dollar to Euro (AUD/EUR) exchange rate has ultimately continued its advance. If Australian data due in the coming sessions continues to impress, the pair could rise even higher.
It may struggle to match the big jump seen last week, but AUD/EUR is still on track to see another week of gains. Last week, AUD/EUR jumped from the week’s opening levels of 0.6348 and closed the week at 0.6397. AUD/EUR continues to climb and on Tuesday touched a high of 0.6417, the pair’s best level since mid-June. AUD/EUR trended closer to the level of 0.6405 at the time of writing.
The risky trade-correlated Australian Dollar has been rebounding in recent weeks as market trade war fears lighten slightly, and Chinese markets see stronger performance.
Since last week, prices of iron ore, Australia’s most lucrative commodity, have strengthened. Chinese markets have been climbing too.
As China is Australia’s biggest trade partner and the biggest importer of Australian iron ore, this news has made the Australian Dollar more appealing.
A weaker US Dollar (USD) has also been among the reasons for the Australian Dollar’s recent recovery, but domestic news has supported the ‘Aussie’ too.
The Reserve Bank of Australia (RBA) held its August monetary policy decision during Tuesday’s Asian session and left policy frozen as was widely expected. The bank’s tone regarding Australia’s economic outlook was also largely unchanged.
However, the bank’s usual cautiously optimistic tone was actually something of a relief for some investors, who had been concerned about the potential impact US-China trade clashes could have on Australia’s economy.
The Australian Dollar was able to climb against the Euro, despite the Euro also seeing stronger performance on Tuesday.
On Monday, the Euro was pressured by a shocking June contraction in German factory orders, but Tuesday’s German trade balance results from June were mixed.
German exports were actually stronger than forecast in June, lightening concerns that Germany’s economy was already being hit by US trade protectionism. Some analysts noted the data pointed towards a temporary blip in German data rather than the start of a weaker trend.
Still, while the Euro was able to recover slightly against the US Dollar (USD) amid this news, the Australian Dollar to Euro exchange rate ultimately climbed. The Euro was also pressured by other Eurozone stats, including the day’s disappointing German industrial production data.
Australian data and developments in global trade news are likely to continue to influence the Australian Dollar to Euro exchange rate in the coming days, as the Eurozone’s economic calendar will be relatively quiet.
Wednesday’s Asian session will see the publication of Australia’s June home loans and investment lending for homes reports, as well as a speech from RBA Governor Philip Lowe.
If Lowe expresses concerns about US trade protectionism or US-China trade tensions, the Australian Dollar could shed some of its recent gains as concerns would worsen again about the potential impact of trade jitters on Australia’s economy
Failing that though, the European Central Bank’s (ECB) latest economic bulletin on Thursday or the RBA’s latest monetary policy statement on Friday could influence AUD/EUR instead.
Of course, any developments regarding US trade protectionism or the US-China trade spat will continue to influence the Australian Dollar to Euro exchange rate too.