EUR/AUD trades near 39-month high after weak China trade data

Key points

The Australian Dollar retreated to a fresh 39-month low against the Euro on Tuesday, weighed down by disappointing trade data out of China.

Data by the General Administration of Customs showed Chinese exports had contracted 14.5% year-on-year in July, which marked a third consecutive month of decrease and also the most considerable rate of decline since February 2020. Market consensus had pointed to a slower drop, by 12.5%.

Total imports shrank 12.4% year-on-year in July, or the most in six months and much more than market expectations.

As a result, China’s trade surplus narrowed to $80.6 billion in July from $102.7 billion in the same month a year ago.

“Those weaker exports and imports figures just underscore the weak external and domestic demand in the Chinese economy,” Carol Kong, currency strategist at Commonwealth Bank of Australia, was quoted as saying by Reuters.

“I think markets have grown increasingly insensitive to disappointing Chinese economic figures … We’ve got to a point where weak data will just reinforce calls for further policy support.”

Meanwhile, a separate set of data showed Germany’s annual CPI inflation had been confirmed at 6.2% in July, slowing from 6.4% in June and staying near May’s 14-month low of 6.1%.

The goods inflation decelerated to 7% in July from 7.3% in June, because of slower increases in the price of food and other confectionery.

The data suggested inflationary pressures in the EU’s major economy had begun to cool. Still, the inflation rate stood well above the European Central Bank’s 2% target.

As of 7:21 GMT on Tuesday EUR/AUD was gaining 0.57% to trade at 1.6828. Earlier in the session, the minor Forex pair went up as high as 1.6860. The latter has been the pair’s strongest level since May 18th 2020 (1.6868).