EUR/AUD Outlook: The outlook is slightly weaker but likely to move sideways, as the rate is below its recent average and near recent lows without a clear driver.
Key drivers:
• Rate gap: The European Central Bank has maintained a cautious approach, whereas the Reserve Bank of Australia faces inflationary pressure, which may lead to rate hikes.
• Risk/commodities: The Australian dollar is under pressure due to declining commodity prices, especially precious metals, which impact the AUD negatively.
• One macro factor: China's weak manufacturing PMI could further strain the AUD by limiting demand for Australian exports.
Range: The EUR/AUD is likely to drift within the recent range, showing limited momentum as the rate consolidates.
What could change it:
• Upside risk: A surprise rebound in Eurozone economic data could strengthen the euro.
• Downside risk: A deterioration in China's economic outlook might weaken the AUD further.
