The Euro to Australian Dollar (EUR/AUD) exchange rate’s rally has lasted for almost a full month now, and the pair is looking on track to sustain another strong set of gains this week unless tomorrow’s highly anticipated Australian job market report beats market expectations.
Following last week’s climb from 1.5975 to 1.6050, EUR/AUD has seen even stronger gains this week already due to another Australian Dollar selloff. At the time of writing on Wednesday, EUR/AUD was trending close to its weekly high of 1.6199, which was also the best EUR/AUD level since the beginning of January.
The Euro has been able to more easily hold its ground versus the unappealing Australian Dollar due to fresh signs of resilience in the Eurozone economy, thanks to this week’s latest German and Eurozone data.
Meanwhile, as Australian and Chinese data disappoints investors, markets are becoming more anxious about how slowing global growth and trade jitters could impact Australia’s economy and pressure the Reserve Bank of Australia (RBA) to cut Australian interest rates.
Concerns that Germany’s economy could have been hit hard by slowing global growth were relieved somewhat today, as Germany’s Q1 Gross Domestic Product (GDP) projections met expectations and indicated that Germany’s economy rebounded from a poor performance in late-2018.
Investors were further reassured by improving growth in the Eurozone overall, which is still projected to have improved from 0.2% to 0.4% in Q1. France’s April inflation rate stats also beat expectations.
These stats bolstered Euro support versus the highly unappealing Australian Dollar, which has been one of this week’s worst performing major currencies in comparison.
The Australian Dollar was already unappealing this week, as US-China trade war fears have worsened and made investors hesitant to buy trade-correlated currencies.
On top of this, investors are already betting that the Reserve Bank of Australia (RBA) will cut Australia’s interest rates once or twice over the next year.
As a result, today’s underwhelming Australian wage growth data and poor Chinese industrial production and retail sales figures only worsened concerns about slowing global growth and deepening trade jitters impacting Australia’s economy,
As China is Australia’s biggest trade partner, poor Chinese data and US-China trade jitters are of particular concern to Australian Dollar investors as the ‘Aussie’ is often seen as a proxy for Chinese economic sentiment.
Australian Dollar investors are now even more anxious ahead of tomorrow’s key Australian job market report, as the latest Australian and Chinese data leads to further Australian Dollar losses.
The RBA recently indicated that its monetary policy outlook depends on the health of Australia’s job market, so disappointing Australian wage data today has worsened concerns that tomorrow’s Australian jobs report could also disappoint investors.
In what could be one of this week’s most influential datasets for Euro to Australian Dollar exchange rate investors, Australian employment change and unemployment rate figures are expected to have worsened slightly in April.
If the data beats expectations, it could douse RBA interest rate cut bets and would be the strongest chance the Australian Dollar has of recovering some of this week’s losses.
However, poor job data would mean further gains for EUR/AUD.
Still, if tomorrow’s Eurozone trade balance results or Friday’s Eurozone inflation rate figures fall short of expectations, concerns about the bloc’s economy could flare up again and weigh on the Euro to Australian Dollar exchange rate’s potential for further gains.