EUR/AUD Outlook:
The EUR/AUD exchange rate is currently below its recent average and near its 90-day lows. This indicates a bearish outlook, driven by recent geopolitical tensions and rising energy prices impacting the euro.
Key drivers:
• Rate gap: The European Central Bank faces significant challenges with energy inflation, while the Reserve Bank of Australia is under pressure from geopolitical risks and fluctuating global demand.
• Risk/commodities: As oil prices surge to near highs, the increased costs are detrimental to the AUD's trade balance and the euro's inflation outlook.
• One macro factor: Recent geopolitical conflicts have elevated uncertainty around economic recovery, particularly impacting consumption and investment in the Eurozone.
Range:
Expect EUR/AUD to continue trading within its recent range, likely holding near the lows as tensions persist.
What could change it:
• Upside risk: A de-escalation of geopolitical tensions could help the euro rebound quickly.
• Downside risk: Further spikes in energy prices or negative economic data from the Eurozone could push the rate lower.
