Traditionally, the Australian Dollar is sensitive to the overall level of risk appetite. Thus, waning risk appetite is set to weigh on the Aussie, economists at Rabobank report.
EUR/AUD: Scope for a move to 1.59 on a six-month view
Against the backdrop of tighter monetary conditions and weaker global growth, the Australian economy is set to experience a slowdown next year.
On balance, we expect USD strength and poor levels of risk appetite to cap upside potential in AUD/USD in the months ahead. That said, we would look to sell rallies in EUR/AUD and see scope for a move to 1.59 on a six-month view.