EUR/AUD: Aussie still being punished for politics? - Westpac

Sean Callow, Research Analyst at Westpac, explains that the AUD has underperformed recently, seemingly punished for Australia’s political turmoil, a weight that may be persisting, judging by its low beta response to episodes of broad USD decline.

Key Quotes

“In coming weeks, neither ECB nor RBA policy seem likely to be important for their currencies. But the ECB will be watching developments in Italy’s budget, while Q2 GDP data is the key release in Australia.”

“Both EUR and AUD seem vulnerable to September’s US risk events, notably the FOMC meeting, a decision on tariffs on $200bn of Chinese imports and expiration of US government funding.”

“Overall, risks look tilted to further AUD decline, to around EUR 0.62 or AUD 1.61, but probably not much further given concerns over Italy’s budget.”