The Australian Dollar to Euro (AUD/EUR) exchange rate sank by around 0.70% in Monday’s European session as Euro strength continued to storm the market.
Despite ongoing negotiations between Greece and its creditors, the Euro exchange rate has remained remarkably resilient and favourable Eurozone data on Monday helped to buoy the common currency further.
The German Industrial Production stat rose from a positively revised 0.2% to 1.4% on the year in April, a surprise to economists who had forecast a smaller rise to only 0.9%.
Economist Carsten Brzeski commented: ‘After three months of struggling, German Industrial Production finally gained some momentum in April, increasing by 0.9% MoM… The increase was driven by almost all sectors. Only the production in consumer goods decreased by 0.9%. The construction sector remains an important growth driver for the entire German economy with an increase of production of 1.3%.’
Meanwhile, the Australian Dollar was offered little support from weak Chinese data which emerged on Monday, reigniting fears that the world’s second largest economy is undergoing a slowdown despite extensive stimulus measures. As China is Australia’s largest trading partner, any negative developments in the nation can pressure the ‘Aussie’ exchange rate lower.
Although China’s Trade Balance posted a near record-high $59.49B in May, imports and exports data disappointed. Chinese Exports slipped by -2.5% on the year, while the Imports stat registered a massive -17.6% annual contraction.
Additionally, Capital Economics has suggested that China’s official Gross Domestic Product (GDP) stat could in fact be overestimated by 1-2% due to a problem in the way in which it’s calculated.
Economist Chang Liu commented: ‘China’s GDP deflator is not an accurate measure of changes in domestic output prices. It exaggerates inflation when import prices are rising, and understates it when import prices fall.’
The Australian Dollar to Euro (AUD/EUR) exchange rate is forecast for fluctuations on Tuesday with the release of China’s Consumer Price Index. Such a hefty release is likely to cause some significant Australian Dollar movement.
Thursday will continue the data stream with the release of Australian Employment Change and Unemployment Rate numbers. A healthy labour market could allow the ‘Aussie’ to climb against other majors.
Meanwhile, as the situation between Greece and its creditors continues, it’s likely that the Euro exchange rate will experience movement in response to any developments.
US President Barack Obama stated after the G7 meeting on Monday: ‘It is going to require Greece being serious about making some important reforms. Not only to satisfy creditors, but also to create a platform where the Greek economy can start growing again and prospering. The Greeks are going to have to follow through and take some tough political choices that are going to be good in the long term.’
The Australian Dollar to Euro (AUD/EUR) exchange rate is trending in the region of 0.6813.
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