The EUR to AUD exchange rate is currently in a range-bound market bias.
Key drivers include:
- The interest rate differential, with expectations of the Reserve Bank of Australia (RBA) raising rates compared to the European Central Bank (ECB) maintaining its current stance.
- Wafting risk sentiment, as Australian dollar movements are influenced by commodity prices, which show some recovery alongside a weaker US dollar.
- Australia’s rising inflation prompting potential rate hikes supports a more favorable outlook for the AUD, while the euro's strength is moderated by ECB concerns over rising inflation due to a stronger currency.
Expect the EUR/AUD to trade within a stable range given recent data, as it has shifted only slightly from recent averages. The near-term range is likely to reflect this confined movement.
Upside risks could arise from stronger economic data from Europe that could boost the euro, while downside risks may stem from heightened geopolitical tensions or economic uncertainty, potentially impacting the outlook for the Australian economy and, consequently, the AUD.
