AUD/EUR Outlook:
Slightly positive, but likely to move sideways, as the AUD trades above its recent average but lacks a clear driver to support further gains.
Key drivers:
• Rate gap: The Australian dollar is benefiting from a recent interest rate hike by the Reserve Bank of Australia (RBA), while the European Central Bank (ECB) has maintained its rates amidst lower inflation.
• Risk/commodities: Recent data shows oil prices are significantly above average, which can enhance demand for the AUD due to its commodity-related nature.
• Macro factor: Australia’s CPI has risen above the RBA’s target, spurring expectations of further monetary tightening that could support the AUD.
Range:
AUD/EUR is likely to remain within its recent range, holding near the highs but lacking strong momentum to test further extremes.
What could change it:
• Upside risk: A stronger-than-expected Australian economic report could shift expectations towards more aggressive RBA tightening.
• Downside risk: Weaker consumer confidence in Australia could lead to a pullback in the AUD against the EUR.