The rates continue within the upward trend in favor of the EUR. Despite the economic downturn in the EU and the political risks, the Euro is still a preferred currency for investors, compared to the AUD. Australia's economy is close to the epicenter of the trade conflict between the US and China, and depends heavily on the situation in the Chinese economy.
The worsening of the trade conflict has a negative impact on commodity currencies. This week isn't an exception. Raw materials become cheaper, taking into account the perspectives of reducing demand in China, as well as the rapid decrease in the growth rate of the world economy. In these conditions, the RBA this week was forced to reduce the rate to a historic low. The trade conflict continues to negatively impact the Australian economy. According to the latest report, the gross profit of Australian companies grew by only 1.7%, while the forecast was an increase by 3%; retail sales are decreasing and GDP grew in the first quarter by only 0.4%. The trade surplus also declined, although imports and exports grew synchronously, by 3%. In general, none of the macroeconomic reports received since the beginning of June supported the AUD. The external factors were also negative, and their impact may increase next week.
The economic situation in the EU has not changed, although the Euro has been able to strengthen against other even weaker currencies. The key event for the Euro this week was the ECB meeting, following which it was decided to leave the rate unchanged, at least until mid-2020. In addition, the forecast for the growth of the EU economy and inflation was raised, and the ECB head Mario Draghi was very optimistic this time, which contributed to the strengthening of the Euro.
Next week will also be very important for the EUR/AUD and volatility will remain high. Much at the same time will depend on external factors, the main ones being the publication of reports on the Chinese economy. Of the greatest interest is the trade balance because according to forecasts, the surplus should grow in May to 20.5 billion against 13.83 billion in April, and this is against the background of the development of the trade conflict. Also, data will be obtained on the volume of industrial production, which is very important for the leading importer of raw materials - Australia. In this situation, the most effective would be the deal on the trend, given the many negative factors for the AUD, as well as the signals to BUY from most technical analysis tools, including the Stochastic oscillator.
