A lack of growth in China’s Manufacturing PMI has limited the Australian Dollar to Euro (AUD/EUR) exchange rate to some minor gains today.
The Australian Dollar (AUD) has risen by 0.3% against the Euro (AUD/EUR) today during Wednesday’s European session, one of a few gains for the ‘Aussie’. The Australian currency has also risen by 0.2% against the Pound Sterling (AUD/GBP) but has fallen by -0.3% against the Chinese Yuan (AUD/CNY) and the New Zealand Dollar (AUD/NZD).
This uninspiring performance comes after the Australian quarterly and annual second-quarter Gross Domestic Product (GDP) dropped from the previous figures of 0.9% and 2.5% down to 0.2% and 2% respectively.
While this is by no means indicative of a recession, it does show that the Australian economy is slowing in growth. The Australian mining industry is likely a strong contributing factor to this result; despite enjoying a boom in iron ore prices over the past years, the ongoing commodity crash and apparent Chinese economic slowdown has severely damaged the output ability of this sector of Australia’s economy.
Commenting on the GDP results, Michael Workman, an economist at the Commonwealth Bank of Australia , stated that ‘The major inhibitor to growth is the ongoing fall in mining investment…thanks to a combination of oversupply from producers and weaker demand from the world’s major buyer, China’.
As the European session progressed, the Euro (EUR) has fallen by -0.3% against the Australian Dollar (EUR/AUD) and has seen little by way of appreciation versus its major peers. This has been triggered by a failure for Eurozone Manufacturing PMIs for August to match up with expectations; no real rises were predicted, but where the Italian, French and overall Eurozone figures were thought to remain static, they instead all declined.
Although some positive news came in the form of a -7k reduction in the German Unemployment Change for August (and a rise in the German Manufacturing PMI), this support was not enough to inspire major confidence in the Euro.
The Euro has dropped by over -0.3% against the US Dollar (EUR/USD), the New Zealand Dollar (AUD/USD) and the Indian Rupee (EUR/INR) today; gains have reached 0.2% against the Swiss Franc (EUR/CHF) and the South African Rand (EUR/ZAR).
No Australian or Eurozone data releases are due until Thursday’s European session, but more immediately, major rises in the US Employment Change for August and Factory Orders for July results may undo the current advantage of the ‘Aussie’ against the common currency.
During the Australasian session, the outcome of the Australian Trade Balance and Retail Sales figures for July may restore order in the AUD/EUR pairing, although later on any dissention in the voting process for the European Central Bank interest rate decision could send the ‘Aussie’ back down once again. Looking further ahead, the Australian economy is likely to receive a shot in the arm after September 4th, as many of the Chinese steel mills that use Australian iron ore will be reopened and resuming demand after the commemorative activities of the past week have finished.
The Australian Dollar to Euro (AUD/EUR) exchange rate was trending in the region of 0.6220 and the Euro to Australian Dollar (EUR/AUD) exchange rate was trending in the region of 1.6082 today.
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