EUR/AUD to head lower towards the 1.59 level – Westpac - FXStreet

The Australian dollar is still easily the weakest G10 currency over the past three months, but it has stabilised on most crosses in the past month, roughly steady against the euro. Near-term EUR/AUD risks back to near 1.6250) but Westpac's baseline year-end forecast is EUR/AUD 1.6100 and late Q4 should see periods of trade nearer 1.5900.

China's slowdown is likely to keep a lid on AUD

"The RBA slowed the pace of its bond purchases slightly but extended their duration to February 2022. Governor Lowe also criticised market pricing of rate hike risk in 2022 and early 2023, reaffirming that AUD should remain one of the lowest (short end) yielders in the G10."

"The ECB is also keen to stress that a rate rise is very distant. It did slow its pace of asset purchases somewhat, but only returning to the early 2021 pace. Its EUR1.85 trillion pandemic program is due to be complete by March 2022 but QE in some form will continue after that date."

"Australia's vaccination rate is still lower than all EU states but is catching up. In the meantime however, Europe's economic recovery is progressing well, whereas Australia's economy remains very constrained by covid restrictions. China's slowdown is also likely to keep a lid on A$ on crosses."

"Near-term EUR/AUD could nudge 1.6250 but our baseline year-end forecast is 1.6100 and late Q4 should see periods of trade nearer 1.5900."