CBA Weigh In On AUD/EUR

CBA note that “AUD/EUR is trading close to our estimate of fair value. Our fair value for AUD/EUR equation centres on EUR0.67. Fair value for AUD/EUR has been broadly steady over the past 18 months. Interest rate differentials between Australia and the Eurozone have narrowed, weighing on fair value for AUD/EUR. However, risk sentiment has improved and fragmentation risks have reduced boosting fair value of AUD/EUR. We forecast that AUD/EUR will remain near current levels in the near term before easing from Q223 as the evidence accumulates that several of the major economies are heading for a recession. However, if the global economy experiences a soft landing rather than recession, AUD/EUR can be stronger than our forecasts.”