Sean Callow, Research Analyst at Westpac, points out that AUD trended lower against EUR from late August to early September, undermined by deepening US-China trade tensions and turmoil in Australian politics.
Key Quotes
“AUD has attempted a patchy recovery since then, with gradual recognition that US-China tariffs might not do much damage to Australian exporters, especially if China boosts infrastructure spending to offset the US tariff impact.”
“Indeed Australia’s commodity price basket is near 6 month highs, implying that AUD has been oversold on a range of crosses, especially with strong GDP data reinforcing the RBA’s view that the next move on rates is probably a hike.”
“In the euro’s favour however, the Eurozone’s huge current account surpluses provide insulation in periods of risk aversion. Moreover, EUR usually outperforms AUD when the US dollar makes broad gains.”
‘Overall, AUD should recapture some lost ground against the euro in coming weeks, with AUD/EUR 0.61 or EUR/AUD 1.64 remaining intact and scope for AUD gains to AUD/EUR 0.63 or EUR/AUD 1.59.”
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