The AUD to EUR exchange rate was 0.9% higher in the European session after the Aussie economy saw Gross Domestic Product (GDP) figures that beat market expectations.
The pair added to yesterday’s gains after the RBA rate cut to trade at 0.950 on the day.
Better growth for the Aussie may be short-lived
The market was expecting a 2% year-on-year growth figure, but the actual number was higher at 2.2%. This provided a boost for the Aussie currency, but traders are under no illusions that the growth picture will continue to impress. The bushfires at the end of 2019, followed by the Coronavirus spread will be a cloud that hangs over the head of the Australian economy during the next quarters.
The impact has been seen on the education and tourism industries but with production slowing in China and supply chains showing strains, the impact could also be felt by exporters in the coming weeks. The RBA’s rate cut yesterday may also be too late to boost growth figures for the first quarter and the U.S. Federal Reserve went further to initiate a 0.50% cut. The Aussie currency has been slumping against the Euro, but the recent bounce is being seen as the European Central Bank (ECB) stated their intentions to join the central bank stimulus push. With interest rates at zero, this may imply that negative rates are coming to the Eurozone and this could slow the recent Euro strength.
Italian growth is another example of short-term flattery
Italy also released its growth figures for the fourth quarter and the number was slightly better than expected at 0.1% but the country is dangerously close to recession levels and may suffer from the recent Coronavirus spread in the northern part of the country.
Eurozone retail sales released today showed a better-than-expected number of 1.7% versus 1.1% but markets are allowing the Aussie currency to make up some of the recent losses. Some analysts are expecting an imminent rate cut from the ECB and this will weigh on the Euro currency until the bank’s actions are clarified. The AUD to GBP exchange rate outlook will await ECB action this week and then will likely be driven by Coronavirus headlines until further economic data can paint a better picture of the future effects on both economies.
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