EUR/AUD Outlook:
The EUR/AUD exchange rate is below its recent average and is currently near its recent lows. This suggests a slight bearish outlook for the currency pair, influenced by existing economic pressures.
Key drivers:
• Rate gap: The European Central Bank (ECB) is maintaining a more accommodative policy compared to the Reserve Bank of Australia (RBA), which is signaling cautious tightening.
• Risk/commodities: Recent gains in oil prices could positively influence the Australian dollar as commodity demand rises, although tariff concerns are a significant concern for AUD investors.
• One macro factor: Sticky inflation in Australia is raising the expectation of further interest rate hikes, providing potential support for the AUD.
Range:
The EUR/AUD is likely to continue moving sideways within its recent range, not straying far from current levels.
What could change it:
• Upside risk: Improved economic data from Germany could bolster the euro's strength.
• Downside risk: Any escalation in trade tensions or further tariffs could weaken the AUD significantly.
