AUD/EUR Outlook:
The AUD/EUR exchange rate is currently above its 90-day average and near recent highs. This position hints at a bullish outlook, primarily driven by domestic factors in Australia.
Key drivers:
• Rate gap: The Reserve Bank of Australia has recently raised interest rates, contrasting with the European Central Bank's current neutral stance.
• Risk/commodities: The bullish trend in oil prices may benefit the Australian dollar, given its status as a commodity currency.
• One macro factor: Sticky inflation in Australia increases the likelihood of further RBA rate hikes, supporting the Australian dollar.
Range:
The AUD/EUR is likely to hold within its recent stable range, with potential for minor upward adjustments.
What could change it:
• Upside risk: A sharper-than-expected rise in inflation could prompt the RBA to act decisively, strengthening the AUD.
• Downside risk: Renewed geopolitical tensions affecting global markets may weaken demand for the AUD, impacting its value against the EUR.