Westpac write "since ECB president......>

EURO-AUSSIE: Westpac write "since ECB president Draghi's dovish turn mid-June,

the euro has held its ground against USD, GBP and JPY but has clearly

underperformed commodity currencies such as AUD. The Aussie's rise against EUR

in that time was despite the RBA delivering cash rate cuts in consecutive

months, to a record low 1.0% and leaving the door open to another cut if the

labour market fails to improve. But the RBA gives the impression that it is in

no hurry to cut below 1%, supporting AUD short term given the overhang of short

positions. Commodity prices - or at least iron ore - are also helpful for AUD as

Australia reports record trade surpluses. The euro's still-large current account

surplus provides underlying support for the currency during thin northern summer

markets. The key question then is whether the ECB delivers more easing than is

already priced in by Sep (deposit facility nudged from -0.4% to -0.5%). We look

for the ECB to deliver the small rate cut but not resume asset purchases in

either Jul or Sep. Meanwhile, likely soft Australian CPI and labour market data

plus a possible iron ore pullback should see the euro gain to AUD/EUR

EUR0.6050/75 or EUR/AUD AUD1.6475/1.6525 multi-week."