AUD/EUR: Temporary reprieve for the Aussie? - Westpac

Sean Callow, Research Analyst at Westpac, notes that AUD fell about 15% against EUR from Feb 2017 to Mar 2018, albeit with periods of consolidation and the past month has seen the pair relatively steady, with both EUR and AUD falling against a recovering US dollar.

Key Quotes

“EUR outperformance in early 2018 has waned as the ECB leadership has pushed back against hawkish members, supported by a cooling in Eurozone activity and survey data. Moreover, Eurozone core inflation has shown no sign of acceleration from the 1% area.”

“Yield differentials seem unlikely to be critical for AUD against EUR over the next few weeks. The RBA is firmly on hold, while the ECB is in no rush to even discuss the outlook for its asset purchases after Sep 2018.”

“US-led trade tensions remain a cause for concern for both Australia and the Eurozone, with AUD to suffer more if US tariffs on China are confirmed and China retaliates in the weeks ahead.”

“But if Eurozone data remains muted and Australia’s key commodity prices continue to stabilize after March’s slide, AUD near term looks more likely to probe the stronger side of recent ranges, as far as AUD/EUR 0.6350 or EUR/AUD 1.5750/1.5800, than to set new 2018 AUD lows.”