The euro surged against the Australian dollar yesterday following the release of unexpectedly positive German factory order data for January. The Australian dollar’s sell-off was also fueled by a lower-than-expected trade surplus for January. Overall, the EUR/AUD pair rallied from a low of 1.5856 to a high of 1.5982 in the past 24 hours.
According to the Australian Bureau of Statistics, the country’s retail sales grew by 1.90% m-o-m to A$35.09 billion in January following a 4% decline in December. The preliminary estimates had pegged the retail sales growth at 1.90%. Economists did not anticipate any change in the preliminary estimates.
The rebound was led by an 8.80% rise in retail sales at department stores in January. Clothing, footwear, and personal accessories posted an increase of 6.50%. Household goods retailing reported a growth of 1.10%. Additionally, cafes, restaurants, and takeaway food increased by 1.20%.
In a separate news release, the Australian Bureau of Statistics stated that the country’s trade surplus fell to A$11.69 billion in January from A$12.99 billion in December and missed forecasts of A$12.25 billion.
Goods and services imports grew by 4.60% (or A$2.08 billion) in January, primarily led by a rise in non-industrial transport equipment. Goods and services exports rose by 1.40% (or A$784 million), fueled by metal ores and minerals.
Later in the day, the Reserve Bank of Australia’s monetary policy committee announced a hike in interest rates by 25 basis points to 3.60%. This is the 10th successive rate hike aimed at bringing down rising inflation. The benchmark rate hike of 3.60% reflects the highest level since May 2012 and denotes the quickest rate hike cycle by the central bank in four decades.
The RBA Governor, Philip Lowe, pointed out that the priority of the Board is to restore inflation to its targeted level of 2%. Excessive inflation certainly makes life challenging for individuals and harms the economy. He further stated that the central bank strives to keep the economy unhurt by rate hikes, but the path to attaining a smooth landing is a difficult one.
According to Destatis, German factory orders rose by 1% m-o-m in January following a 3.40% rise in the previous month, which pleased economists who were expecting a 0.60% decline in factory orders. On a y-o-y basis, fresh orders plunged 10.90% in January 2023. Excluding large orders, fresh orders grew by 2.90% m-o-m in January.
While domestic orders fell by 5.30% m-o-m in January, overseas orders rose by 5.50% in the same period. Furthermore, fresh orders from the Eurozone declined by 2.90%. Likewise, orders from outside Europe surged by 11.20%.
The capital goods sector reported an 8.90% increase in fresh orders. On the contrary, orders for intermediate goods declined by 8.90% m-o-m in January. Similarly, new orders for consumer goods fell by 5.50%. Orders for aircraft and spacecraft construction jumped 138.50% in January. Electrical equipment manufacturing posted a decline of 22.30%.
The unexpected rise in German factory orders is expected to keep the EUR/AUD pair slightly bullish in the short term.
The historical price chart indicates that the EUR/AUD pair is ascending after testing the support at 1.5690. The next resistance is anticipated only near 1.6210. Additionally, the currency pair is trading above its 50-day moving average, while the MACD indicator is showing a positive reading. Therefore, we anticipate the EUR/AUD pair to remain in an uptrend in the days ahead.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
