The Eurodollar gained against the Aussie in the Asian session yesterday following the release of worse-than-anticipated building approvals data by the Australian Bureau of Statistics (ABS). However, the euro lost the gains after the report of weak Sentix investor confidence data in the European session.
Overall, the EUR/AUD pair remained range-bound between 1.5750 and 1.5785 in the last 24 hours.
According to the ABS, retail sales increased 0.4% m-o-m in May, following an increase of 1.1% in the earlier month. The preliminary estimates had pegged the retail sales growth at 0.1% for the reported period. Economists had anticipated no change in the initial estimates.
On a y-o-y basis, retail sales increased 7.70% in May 2021. Food retailing increased 1.1% (or A$141.40 million) in May. In particular, supermarkets and grocery stores posted a growth of 1.9% (A$188.80 million). However, liquor sales fell by 2% (or A$25.10 million). Household goods retailing declined 1.1% (or A$59.80 million) in May.
Furniture, floor coverings, housewares, and textile goods retailing dropped 2.4% (or A$36.40 million). Electrical and electronic goods retailing decreased 1% (or A$21.80 million). Hardware, building, and garden supply retailing declined by 0.1% (A$1.70 million).
Clothing retailing decreased 0.4% (orA$7.30 million) in May 2021. On the contrary, footwear and other personal accessories posted a growth of 0.8% (or A$6.60 million). Café, restaurants, and takeaway food services recorded a growth of 0.7% (A$29.80 million) in May 2021.
In a separate news release, the Australian Bureau of Statistics stated that the building approvals fell by 7.1% m-o-m in May, following a decline of 5.70% in April and worse than the 5% drop anticipated by economists.
Total dwellings approved declined by 7.10% in May 2021, following a 5.7% drop in the prior month. Private sector houses decreased 10.30%, while private sector dwellings, barring houses, increased 1.2%. The value of non-residential building approved increased 28.50%.
The value of all buildings increased 4.50%. Specifically, the value of total residential buildings declined 6.70%. This comprises a 5.8% drop in fresh residential buildings and a 12.70% decline in residential alterations and extensions.
According to the IHS Markit, German final services PMI (purchasing managers’ index) increased to 57.50 in June, from 52.80 in May, the highest reading since March 2011. The country’s service sector activity gained pace in June against the backdrop of additional easing of virus containment initiatives. Firms posted a sharp rise in fresh business and also a notable increase in outlook for the forthcoming 12 months, both of which assisted in boosting an increase in employment.
An increase in backlogs of work was posted for the third consecutive month in June, with companies highlighting the impact of raw material shortages and lack of staffing capacity to fulfill demand.
Service providers’ anticipations about business activity over the forthcoming 12 months hit the highest level since February 2000, with about 46% of companies anticipating an increase in activity against only 10% expecting a drop.
Overall, fueled by robust growth of both manufacturing production and services business, the Germany Composite Output Index increased to 60.10 in June, from 56.20 in May.
As per data provided by IHS Markit, the Eurozone final services PMI (purchasing managers’ index) increased to 58.30 in June, from 55.20 in May. The initial estimates pegged the services PMI reading at 58. Economists did not anticipate any change in the initial estimates.
Overall, the IHS Markit Eurozone PMI composite output index posted a reading of 59.50 in June, from 57.10 in May. Notably, for the fourth month in a row, the reading is over the 50 level indicating expansion of the industry. Also, it is the highest reading since June 2006.
Notably, for the fourth consecutive month, backlogs rose, causing pressure on capacity. Employment levels were consequently higher for the fifth month in a row. The pace of expansion also increased, hitting the highest level since the beginning of 2018. Overall, the IHS PMI data reflects a 15-year high growth of the Eurozone.
The Sentix Eurozone investor confidence index increased to 29.80 in July, from 28.10 in the previous month, but missed the reading of 30.20 anticipated by economists.
The current situation index also increased to 29.80 in July, from 21.30 in June. On the contrary, the expectations index dropped to 29.80 in July, from 35.30 in the earlier month.
Interestingly, the world confidence index slightly increased to 29.40 in July, from 29.30 in the prior month. The current situation index increased to 32.20 in July from 27.50 in June. The expectations index fell to 26.60 in July, from 31.10 in the previous month.
The mixed economic data from both Europe and Australia is expected to keep the EUR/AUD pair range-bound with a slight bullish bias due to the strong economic rebound seen in the Eurozone.
The historical price chart indicates that the EUR/AUD pair is having firm support at 1.5750. The next major resistance is anticipated only near 1.5850. Additionally, the stochastic oscillator is also in the oversold region. Therefore, we are anticipating the EUR/AUD pair to begin an uptrend in the days ahead.
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