11 Jul 2013
Flash: EUR/AUD still below long-term average – Westpac
FXstreet.com (New York) - According to Global FX Strategist Sean Callow at Westpac, “The EUR/AUD is obviously still comfortably below its long-term average, but now only about 10%, which is hardly extreme given the sustained growth gap between Australia and the Eurozone.”
Australia hasn’t suffered recession since the early 1990s, while the Eurozone economy shrank substantially in 2008/09 and returned to recession in early 2012. Its most recent quarter of economic expansion is 0.1% in Q3 2011.
Over the past year or so, the EUR/AUD has broadly tracked the swings in yield differentials quite well. “The recent rally has sharply reduced the apparent overvaluation of AUD. However, big picture, the relationship between the cross and the 2-year spread is not great.” Callow warns.
Australia hasn’t suffered recession since the early 1990s, while the Eurozone economy shrank substantially in 2008/09 and returned to recession in early 2012. Its most recent quarter of economic expansion is 0.1% in Q3 2011.
Over the past year or so, the EUR/AUD has broadly tracked the swings in yield differentials quite well. “The recent rally has sharply reduced the apparent overvaluation of AUD. However, big picture, the relationship between the cross and the 2-year spread is not great.” Callow warns.