The Australian dollar (AUD) and Euro (EUR) both face strong headwinds in coming months with declines versus USD likely. The only question here being how large they will be.
For currency markets this is interesting as it should leave AUD/EUR & EUR/AUD within recent ranges says a new forecast note issued by Westpac Bank.
For the near-term timeframe though it is the Aussie that is expected to enjoy strength.
At the time of writing we see the Euro to Australian dollar exchange rate (EUR/AUD) trading at 1.4608.
The AUD/EUR is therefore at 0.6846.
The Technical Outlook
There can be no doubt that the AUD and EUR both face strong headwinds in coming weeks.
Both are forecast to decline versus the USD and the only question at present relates to how large the move will be.
“This should leave AUD/EUR within recent ranges,” says Westpac’s David Coloretti.
But, “with markets already priced for an RBA cash rate below 2% and the ECB’s broader QE programme only starting in March, risks both multi-week and multi-month are for AUD outperformance,” says Coloretti.
Westpac look for AUD/EUR to trade mostly 0.6750 – 0.7050 near term but with increasing trade at the top of the range into Q2.
Turning the equation towards EUR/AUD, “we look for EUR/AUD to trade mostly 1.42 – 1.48 near term but with increasing trade at the lower end of the range into Q2,” says the Westpac analyst.
Aussie Dollar Today
Australian Consumer confidence surged in February, +8%/mth to 100.7, the first time since Feb last year that the index is above 100.
According to Raphael Sonabend at CaxtonFX:
“Overnight Australian data proved to be very strong, with consumer confidence up 8% from a previous reading of 2.4%, home loans rose to 2.7% from -0.4% and investment lending data up to 6% from -2.2%.
“In light of the recent pessimistic RBA comments, this was not enough to halt the sterling charge and the rate continued to climb this morning above 1.969.”