AUD/EUR Outlook: Slightly positive, but likely to move sideways, as the Australian dollar is above its recent average and trading near mid-range.
Key drivers:
• Rate gap: The Reserve Bank of Australia (RBA) is expected to consider interest rate hikes due to high inflation, potentially making the AUD more attractive compared to the European Central Bank's cautious policy.
• Risk/commodities: The recent rise in oil prices supports the Australian dollar, as a commodity currency, but overall commodity price trends remain unstable.
• One macro factor: Australia's inflation has surged beyond target levels, raising expectations for a RBA rate hike, which could positively influence the AUD.
Range: Movement is likely to hold within the recent 3-month range as influences are mixed.
What could change it:
• Upside risk: A stronger-than-expected inflation report from Australia could prompt immediate RBA action, boosting the AUD.
• Downside risk: A disappointing manufacturing report from China could reduce demand for Australian exports, negatively impacting the AUD.