The rates continue within an uptrend. Over the last month, we have seen a weakening of the euro, amid an economic downturn and the upcoming ECB meeting, at which the decision to ease monetary policy was expected. The Australian dollar was also strengthened, thanks to investors' optimism about the perspectives for trade negotiations between China and the US and, consequently, rising prices for raw materials, including iron ore.
Perhaps this week the weakening of the euro will stop. The Australian dollar appeared under more pressure after the publication of the RBA meeting minutes, where it was announced the bank is considering a further decrease in the rate. In addition, external factors were less favorable for the AUD. In particular, reports on the Chinese economy on Monday showed a slowdown in production growth to 4.4%, the lowest figure in the last 17.5 years. According to forecasts for August, production output, on the contrary, had to increase by 5.2%. For Australia, a slowdown in China's output growth could have negative consequences in the future.
Macroeconomic reports on the economy of the EU were unexpectedly good and contributed to the strengthening of the euro, which was already recovering after the ECB meeting. As it became known on Tuesday, the ZEW index of business sentiment recovered in September to -22.5 pips both in Germany and in the EU as a whole. The consumer price index published today amounted to 1%, in line with forecasts. Taking into account the reduction of the credit rate announced this week, as well as the resumption of the quantitative easing program, there is every reason to expect a further improvement in the economic situation.
We believe that the price correction that led to the strengthening of the AUD against the trend has been completed and now we can expect a further strengthening of the euro. However, this will require additional incentives, which can be obtained as early as next week, with the publication of business activity indices. It should also be noted that there is a doubtful perspective of ending the trade conflict between China and the United States. Most technical analysis tools also signal the efficiency of the deals to buy, in accordance with the current trend.
