EUR Dips as the AUD Strengthens

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Today hasn't been a good day so far for the EUR, as it dipped against a number of major currencies.

The EUR/USD pair, for example, hovered around 1.2830-35 at the low end. Although the EUR/JPY pair reached a high of 119.64, it dropped a few notches lower as developments in the EU economy came to light.

This is primarily due to the continued weakness in the EU's economy. For one, Germany reported a drop in its Purchasing Managers' Index (PMI) in March, which fell from February’s 50.3 to 49.0. Although the figure is slightly better than the 48.9 consensus, the numbers still indicate a contraction in Germany--naturally a bad sign, especially for the Eurozone's largest economy.

Other EU countries have also seen a similar trend in PMI figures, with Italy contracting from 50.8 to 48.3 and Spain dropping from a dismal 46.8 to an even lower 44.2. France, however, experienced a very slight rise from 43.9 to 44.0, but still indicates a contraction in their economy.

There is also worry that the EU's jobless rate has risen in March from February's 12%, further contributing to the currency's dip.

Meanwhile, the cross pair of the EUR/GBP dipped from an initial 0.8452 to a low of 0.8426. Like its other European neighbors, the United Kingdom also saw a contraction in its PMI, from 47.9 to 46.8.

In Australia, the Reserve Bank announced no changes to its cash rate, which remains at 3 per cent. This is in line with expectations of analysts who see the rate unchanged until the middle or latter part of the year.

Prior to the announcement, the Aussie dropped against the USD, falling from 104.60 US cents to 104.50 US cents. However, it picked up later in the day, going as high as 104.80 US cents aided by the Reserve Bank's bullish tone and a weak US economy.

For more updates, be sure to catch our FX Trading tips regularly here at FX Strategy.

By FX Strategy Team, Published on 2nd of April 2013
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