EURAUD Forecast highlights
- EURAUD surged to long-term highs (1.85) amidst global trade tensions
- Conclusion of trade deals may rejuvenate AUD
- Following a consolidation, FX rate expected to range at 1.70-1.80 for now
How has EURAUD performed recently?
Earlier in the year, Europe was a laggard in the world investment market. Not anymore.
Under President Trump, investors have discovered something novel in Europe: Stability. The continent is an oasis of calm when upheaval is occurring in world trade. This advantage is spilling over to the currency market.
Against the Aussie Dollar, the Euro has strengthened markedly in the past four months. From 1.650 to one Euro, the rate spiked to 1.850 within a few weeks (AUD weaker). But the rally has regressed substantially since attaining that peak. It traded at around 1.759 at the time of update (see below).
What’s next for EURAUD? Note that the earlier rally (1.65 to 1.85) was really uncharacteristic of the rate. Its historic pattern suggests a more ‘jagged’ line, rather than a highly trending one. One-and-a-half step forward, one step back – that sort of move.
Hence the rate is still digesting the earlier explosive upward move. In this ‘consolidation’ phase, the rate could bounce up and down within a certain band. This band is suggested at 1.700 to the downside and 1.800 to the upside.
Is it a good time to buy Euros with AUD?
The Euro is always a larger currency than the Aussie dollar. And in recent months, it is getting more expensive.
However, prices have come down slightly, to 1.756. Should we take advantage of this correction and buy Euros now?
If you need the Euros now, as summer is nearly here, 1.75 may not be a bad rate to buy some. If you can wait, perhaps sit tight for now and see if the rate will drop further.
The rate appears to be fluctuating within a band so there is a chance that the rate may see 1.72.
Will the Euro get stronger in the second half of 2025?
The Euro was reinvigorated amidst the market chaos during April-May.
Against the USD, for example, the rate soared to a four-year high as investors dumped the dollar. It is therefore not surprising that the Euro also put on considerably gains against the Aussie Dollar.
The question now is whether these gains can be sustained. Mind you, all the European macro problems that investors identified earlier (low growth, falling rates) have not disappeared. In view of the rising trade tensions, the ECB is keeping borrowing costs down to sustain the economic recovery. Just this week, the European Central Bank lowered interest rates again by another 25 bps. Australia, however, is also in a rate-cutting mode. In May, the Reserve Bank of Australia (RBA) cut the policy rate by 25bps to 3.85 percent.
In terms of monetary direction, both regions are heading in the same path. No significant deviation are noted from the monetary minutes.
Where deviation may occur is economic activities. European growth is low but firm. For example, while some countries are humming along better but in aggregate, these growth disparities tend to even out (see ‘Economic Sentiment’ chart below, Germany sinking but Spain still positive)
Source: Yardeni.com
For Australia, the economic outlook is potentially being dampened by the ongoing bearish posture in commodities (see below). Remember Australia is a commodity export powerhouse. A mini bear market in industrials metals, for instance, may reduce export earnings. Hence the recent weakness in the Aussie Dollar.
Overall, the highly volatile macro outlook may hit the Aussie Dollar relatively harder than the Euro, since the former is a highly cyclical currency. China, a country currently at loggerhead with US, imports a significant amount of commodities. But these assessments are subjected to revisions since trade deals may emerge anytime. These agreements may boost the AUD against EUR.
What is the EURAUD forecast in weeks?
Most forecasters of EURAUD are expecting the rate to trade at current levels in the months ahead.
The median forecasts centered around 1.750, plus minus 0.05 further (see below). But are these forecasts too static?
Perhaps analysts are taking a more conservative view since it is difficult to adopt a high-conviction view these days. Near-term fluctuations are envisaged within 1.70-1.80.
Source: ExchangeRates.org.uk (June 25)
Jackson is a core part of the editorial team at GoodMoneyGuide.com.
With over 15 years of industry experience as a financial analyst, he brings a wealth of knowledge and expertise to our content and readers.
Previously, Jackson was the director of Stockcube Research as Head of Investors Intelligence. This pivotal role involved providing market timing advice and research to some of the world’s largest institutions and hedge funds.
Jackson brings a huge amount of expertise in areas as diverse as global macroeconomic investment strategy, statistical backtesting, asset allocation, and cross-asset research.
Jackson has a PhD in Finance from Durham University and has authored over 200 guides for GoodMoneyGuide.com.
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