The EURAUD exchange rate looks to Australian CPI and German retail sales data on Wednesday for movement.
EURAUD – Daily Chart
The price of EURAUD has rallied from lows in late November to a high at 1.6800 in December. The price has now dipped back to 1.6580, and 1.6500 is key support.
Data on Wednesday starts at 8:30 am HKT with the release of monthly consumer price data from Australia. Analysts expect a rise from 2.1% to 2.2% as consumers struggle with price rises despite stubborn interest rates.
A slowing Australian economy through 2024 caused many economists to raise their forecasts for interest rate cuts in 2025 and pull forward the timing. The market is now pricing in at least three 0.25% cuts by around the middle of 2025. However, the medium-to-long-term Reserve Bank cash rate is now expected to settle at a higher level than previously thought.
Lower interest rate expectations have led to weakness in the Aussie dollar, and the RBA is in a hard place, with the RBA’s preferred measure of Aussie inflation remaining substantially above its target range. Still, the economy needs lower rates to boost activity. Higher CPI data on Wednesday could add to fears over the Australian situation.
According to analysts, Australian home prices are predicted to keep falling in the first half of this year, but they also expect a small and short-lived decline. Data from CoreLogic and PropTrack both showed Australian home values posting their first monthly decline in around two years in December.
“A cyclical downswing is likely for early 2025 but it may not be large,” according to CoreLogic.
European data comes at 3 pm HKT from Europe’s largest economy with German factory orders and retail sales. The latter will be the key number, with economists expecting a move from 1% last month to 1.9%.
German industry has struggled in recent years, and a colder winter now leaves the sector at risk, as Europe burned through its gas reserves at the fastest pace over the last seven years. That raises the risk of an energy shortage in the country if the winter extends further into the New Year.
The Australian dollar’s weakness may have gone too far with higher interest rates, but the economy is hurting the dollar’s performance.
