Australian Dollar to Euro (AUD/EUR) Exchange Rate Forecast: ‘Aussie’ on Limited Uptick in spite of Chinese Inflation Slump

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Euros (EUR)

After slumping to a weekly low on an unexpectedly weak Chinese inflation reading the AUD/EUR exchange rate has nevertheless begun to regain ground thanks to slowed Eurozone Industrial Production.

‘Aussie’ (AUD) Weighed down by Sharp Decrease in Chinese Imports as Safe-Haven Demand Bolstered Euro (EUR)

Although the ‘Aussie’ (AUD) started the week on a bullish run the antipodean currency was turned dovish on Tuesday as a result of the September Chinese Imports figure, which contracted by an unexpectedly sharp -20.4%. As China is the major export destination for Australian base metals this implicit decline in demand saw the ‘Aussie’ slump, with an atmosphere of risk aversion dominating trading throughout the rest of the day. This bearish reading overshadowed a decided improvement in the NAB Business Confidence Index, where business sentiment rose from 1 to 5 on the month.

Meanwhile, the common currency (EUR) was boosted thanks to its safe-haven status as investors tried to gain distance from the threat of a slowing Chinese economy. The finalised German Consumer Price Index failed to change from the earlier provisional September figure, offering some additional support for the Euro.

Declining Chinese Inflation Sparks Fresh Slowdown Worries to Push AUD/EUR Exchange Rate to Weekly Low

The prospects of the antipodean currency worsened further with the release of the Chinese Consumer Price Index, which at 1.6% showed the lower level of domestic inflation since 2008. This poor showing naturally sparked fresh fears of persistent slowdown within the world’s second largest economy, prompting markets to remain bearish. However, in spite of the AUD/EUR exchange rate rapidly slumping to a weekly low of 0.6332, the ‘Aussie’ soon began to rebound against a number of rivals.

Sentiment towards the single currency took a downturn later in the day thanks to the Eurozone’s Industrial Production figure for August. Indicating that the economic recovery of the currency union remains rather more tenuous than policymakers might like, this raised questions of the possibility of further monetary easing measures to come from the European Central Bank (ECB).

AUD/EUR Exchange Rate Forecast: Australian Unemployment Data Could Produce ‘Aussie’ Volatility

A stronger rally may be in store for the ‘Aussie’ with a raft of Australian unemployment data upcoming, although as the Employment Change figure is expected to show a more limited increase in the number of employed individuals on the month this could prove to be a more dovish influence.

Ahead of the weekend the Eurozone will only see the release of the finalised September Consumer Price Index, which is unlikely to provoke much volatility for the AUD/EUR exchange rate as the figure is not expected to show any change on the earlier provisional result.

Current AUD, EUR Exchange Rates

At time of writing, the Australian Dollar to Euro (AUD/EUR) exchange rate was trending positively in the range of 0.4702, while the Euro to Australian Dollar (EUR/AUD) pairing was in a minor downtrend around 1.5741.

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