The Australian Dollar Euro (AUD EUR) exchange rate climbed on Friday as markets reacted to the latest AiG performance of manufacturing index and yesterday’s disappointing Eurozone inflation readings.
Australian Manufacturing Performance Beats Forecast, AUD Exchange Rates Climb
Australia’s manufacturing growth rebounded to 57.3 in November, beating the previous month’s 51.1 print and ending a two month streak of decline.
Growth within the food and beverage industries as well as coal, petroleum and chemicals assisted in the rise of new orders over the November period, though activity in major machinery and equipment manufacturing slowed slightly.
AIi Group Chief Executive Inees Willox asserted that the strong figures followed on from uninterrupted growth in October of 2016, growth that bodes extremely well for the New Year.
‘Sales, production and employment all jumped ahead in November and the strong rise in new orders points to further good news ahead as we head to Christmas’.
Beyond this, Australia’s total number of building approvals issued climbed to a seasonally adjusted 0.9% month on month in October, according to the Australian Bureau of Statistics, beating the forecast of a -1.0% decline and giving the ‘Aussie’ Dollar even more purchase.
Eurozone Manufacturing Hits near Record Highs, AUD EUR Exchange Rate Retains Lead
Manufacturing within the bloc flew to near record highs in November by printing at 60.1, inches ahead of the preliminary reading of 60 but easily surpassing October’s 58.5.
This marked the second highest reading for the assessment on record, with April’s high in 2000 still taking the cake.
The surge also proved broad-based across the bloc, with all countries considered by the assessment growing for the sixth consecutive month (Germany retaining the strongest lead at 62.5 points, Greece the weakest at 52.2).
Markit Chief Economist Chris Williamson shared his thoughts on the readings:
‘November’s surveys produced a clean sheet of improved PMI readings for all countries, resulting in the best performance of Eurozone manufacturing since the height of the dot-com boom’.
Nonetheless, this was not enough to topple the ‘Aussie’ Dollar’s lead, with markets still buying into the AUD on the back of the positive construction report.
AUD EUR Forecast: Volatility Ahead on the Trump Tax Vote
The AUD EUR exchange rate could become increasingly volatile this evening depending on the result of the Senate vote on US tax reform.
Despite some 11th hour hiccups yesterday the voting will commence once again today, with markets now even more optimistic that the bill will attain the necessary votes to pass.
Various senators who were previously on the fence and regarded by economists as liable to vote against the bill have since expressed favour in the legislation, with Senator John McCain notably asserting his reluctant support.
If the bill is indeed passed then the US Dollar will likely jump in demand, with markets having anticipated the massive tax cuts for some time.
This would then have a knock on effect on the ‘Aussie’ Dollar, draining demand away and likely leaving the Euro in the lead.
A failure to pass the bill, however, would massively curb demand for the ‘Greenback’, likely leaving the AUD EUR exchange rate trading along similar lines as the week draws to an end.