Cautious Outlook from Westpac Leaves AUD/EUR Exchange Rate Tight
The Australian Dollar has made minimal gains against the Euro today, following a pessimistic forecast from economists at Westpac Bank.
Analysts have estimated that real GDP growth could be 2.5% in December 2018 and December 2019, which is sharply below Reserve Bank of Australia (RBA) estimates.
RBA experts have been more optimistic in their outlook, estimating 3.25% growth over 2018 and 2019. Explaining their figures, Westpac officials said;
‘A solid ongoing boost to growth will come from non-residential construction, government spending and exports.
However, we are less upbeat on the consumer, housing and equipment investment.
We expect consumer spending to be lacklustre at a time of persistent weak wages growth and high debt levels, and for the home building cycle to turn down following an extended strong upswing’.
Westpac’s experts have also considered the possibility of sustained slow wage growth, stating;
‘Considerable slack remains in the labour market which, together with the cost control focus of businesses, will restrain wage growth prospects.
Conditions in China, our number one trading partner, are cooling in response to tighter policy.
This will dampen commodity prices and see national income growth slip below trend, in contrast to recent strength’.
Euro to Australian Dollar Exchange Rate Trades Tightly as Eurozone Construction Output Slows
News of slowing growth in the Eurozone construction sector has weakened the Euro today, leading to a minor decline against the Australian Dollar.
The year-on-year reading has slowed from 2.9% growth in November 2017 to 0.5% in December, which indicates continued growth if at a much slower rate.
December’s minor growth reading is the worst result in less than a year for the Eurozone construction sector, as a -5.6% drop was reported in January 2017.
The results have negative implications for future Eurozone PMI and GDP readings, although other sectors like manufacturing and services also factor in.
Australian Dollar to Euro Exchange Rate Outlook: RBA Data could Trigger AUD/EUR Advance
The Australian Dollar to Euro (AUD/EUR) exchange rate could rise sharply in the near-term, depending on the tone of two Reserve Bank of Australia (RBA) releases.
The first will be an imminent speech from RBA Assistant Governor Michele Bullock, who will be speaking at a ‘Responsible Lending and Borrowing’ summit in Sydney.
Ms Bullock could touch on present economic conditions in Australia, which may include an evaluation of how the economy could perform in the future.
The main event is likely to be the release of the RBA’s minutes for February, which will come out on 20th February.
If the minutes suggest a future downgrade of the RBA’s growth forecast (in line with Westpac’s estimates), the Australian Dollar could fall in value against the Euro.