AUD/EUR Outlook:
The AUD/EUR rate is currently at a 90-day high, trading 4.4% above its 3-month average. However, the outlook is slightly positive but likely to move sideways as geopolitical tensions weigh heavily on the Australian dollar.
Key drivers:
• Rate gap: The Reserve Bank of Australia currently faces challenges due to the geopolitical risks impacting the AUD, while the European Central Bank is dealing with energy price surges affecting the Euro.
• Risk/commodities: Higher oil prices have increased costs for Australia, impacting the AUD negatively. The Eurozone also suffers from rising energy prices, but this pressure complicates the euro's market position.
• One macro factor: Recent geopolitical conflicts have raised concerns over Australia’s economic performance as it relies heavily on global demand, particularly from China.
Range:
Expect the AUD/EUR to hold within its recent range, likely drifting without significant movement in either direction.
What could change it:
• Upside risk: A rapid de-escalation of geopolitical tensions could boost the AUD significantly.
• Downside risk: Continued geopolitical instability and rising oil prices could further pressure the AUD.
