AUD To Euro Forecast: Surprises Ahead?

Will the AUD strengthen against the EURO?

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Arielle Executive - Sydney, Melbourne, New York

Last updated: 27th May 2024

aud to euro forecast
Arielle Executive - Sydney, Melbourne, New York

Last updated: 27th May 2024

Reading Time: 5 minutes

The Australian dollar is generally weaker against the world’s major currencies including the US dollar, the British pound and the European euro. But with a somewhat bearish outlook for the euro in 2024, could the Aussie dollar appreciate against the world’s second most-used currency?

As of May 2024, you’d need around $170 Australian dollars (AUD) to buy €100 (EUR). Since 2024 began, the AUD/EUR exchange rate has remained between €0.59 to €0.61.

Discover what the year ahead could hold for the AUD to EUR conversion rate.

How Has The AUD/EUR Performed?

The euro took a beating in 2022, depreciating against the US dollar in one of its worst-performing years. At one point, it lost 16% of its value against the greenback.

In July 2022, the euro lost parity with the US dollar for the first time in 20 years — it’s historically been worth more than the dollar.

Above: After a turbulent couple of years, the euro is expected to remain stable against the Australian dollar in 2024.

Russia’s invasion of Ukraine naturally affected economies across the Eurozone due to supply chain disruptions, increased energy costs and increased fear and doubt among consumers.

Not coincidentally, it was the euro area’s worst year of inflation — reaching 10.6% in October 2022.

The Aussie appreciated slightly against the euro in 2022, with an average conversion rate of around 65c for the year.

But recently, the AUD to euro pairing has been characterised by stability. One euro was worth AU$1.63 on average throughout 2023, and is currently worth around AU$1.64.

Did You Know?

While the European Union includes 27 countries, the euro (€) is the single currency across 20 member countries. The collective of countries where the euro is used is known as the Eurozone.

Leading AUD to Euro Forecasts For 2024.

The AUD to euro forecast from NAB sees the currency pair remaining at €0.61 in June through to September, before lifting slightly to €0.62 in the December 2024 quarter.

AUD/EURJun 2024Sep 2024Dec 2024Mar 2025Jun 2025Sep 2025Dec 2025
0.610.610.620.620.630.640.64

Above: By June 2025, NAB thinks AUD/EUR will be €0.63.

ANZ sees the potential for positive upside for the AUD in 2024, especially if the USD weakens and global risk sentiment improves.

ANZ analyst Mahjabeen Zaman said the AUD stands to gain “against currencies where interest rates have eased aggressively.”

Demand for the AUD compared to the euro could improve given the Reserve Bank of Australia (RBA) looks poised to keep Australia’s interest rates higher for longer — but a strengthening of the Eurozone economy could also balance out a modest appreciation of the Aussie.

Eurozone saw higher-than-expected GDP growth in the first quarter of 2024, and slowing inflation:

  • Its economy grew by 0.3% compared to an anticipated 0.1%.
  • Annual inflation remained stable at 2.4% in April 2024 (the ECB target is 2%).

ING says that even if the European Central Bank (ECB) diverges further from the US Federal Reserve by cutting rates in June, as is expected, “an idiosyncratic EUR decline [relative to the USD] would not be warranted.”

FX strategist Francesco Pesole said, “Crucially, the euro retains a decent fundamental position (e.g. the eurozone’s terms of trade), which would make a move towards parity increasingly unsustainable.”

Important!

The European Union has the third-largest economy in the world behind the US and China, dominated by the GDP output of Germany, France and Italy — which all use the euro. Stagnant growth is forecast for Germany in 2024, and economists from the IMF described the country as facing “some serious economic challenges.”

What Is The Impact Of Monetary Policy On The AUD/EUR?

Upside inflation risk is keeping all central banks cautious.

However, the European Central Bank (ECB) is strongly backed to start cutting interest rates in June, and may cut rates multiple times throughout 2024.

An April survey of 97 economists found most think the ECB will reduce its deposit rate from 4.00% to 3.75% in June, with 38 of those polled predicting a total of 100 basis points or more of reductions this year.

That would put the Eurozone’s cutting cycle well ahead of the US Federal Reserve and the Reserve Bank of Australia.

Both central banks are not seeing inflation trend downwards as quickly as hoped and may not cut rates at all in 2024.

Important!

A ‘decoupling’ of ECB rates from the Fed could put the euro at risk of further weakness.

However, Italian Governor Fabio Panetta told Reuters that a softening of the single currency was usually offset by higher bond yields and commodity prices.

Depending on the extent of the ECB’s cuts, the Aussie could hold up well against the euro with Australia’s interest rates on hold, or even potentially set to rise again if inflation data continues to disappoint.

Did You Know?

There are signs of decreasing activity around the euro. Between 2019 and mid-2023, the Euro made up around 30-40% of the value of transactions made on the Swift network. In March 2024, USD accounted for 59.5% of transaction value, while the euro was 12.13%.

Will The AUD Get Stronger In 2024?

The AUD/EUR pair’s exchange rate is also heavily influenced by how both currencies perform relative to the US dollar — a safe haven currency for investors.

Forecasts are for the Australian dollar to strengthen slightly against the greenback in 2024.

A major headwind for the Australian dollar in 2024 is slowing demand for our commodities, in large part due to China’s property sector downturn.

Westpac’s Sean Callow said China’s property market has been under stress for years and its stock market has underperformed in 2024, triggering concerns among policymakers.

Another risk is that US-China trade relations nosedive around election campaigning in the US.

President Biden recently announced US tariff hikes on some Chinese imports, and AMP’s Deputy Chief Economist Diana Mousina said the hawkish US sentiment towards China “could get worse if Trump is re-elected in November (as he is proposing tariffs on all Chinese imports).”

Encouraging policy moves by China were announced in May.

Tao Ling, Deputy Governor of the People’s Bank of China, said the central bank will put up 300 billion yuan (US$42b) to finance loans to local state-owned enterprises for buying unsold apartments already built, which could improve liquidity for housing developers.

That’s on top of 935 billion yuan in lending by commercial banks to finish building up to 20 million pre-sold homes.

Important!

Westpac’s Market Outlook issued May 20 posits that China’s 5.0% GDP growth estimate for 2024 “is certainly achievable; and, looking to the long-term, all the investment being undertaken is developing a strong foundation for a sustainable, robust uptrend in national income.”

Final Word On AUD To Euro Outlook.

Forecasts are for the AUD/EUR to remain steady around the €0.61 mark in 2024 — meaning one euro is worth $1.64 Australian dollars.

A widening interest rate differential between Australian and European central banks could increase demand for the Aussie relative to the euro, but the impact is expected to be minimal.

The AUD could also strengthen relative to major currencies if China can navigate a clear path to its growth goals.

Jody

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0 thoughts on “Plus500 Review Australia: Pros, Cons, Fees & Verdict

  • I attempted to use the “hack” to dodge conversion fees, but sadly after converting AUD to USD on a Wise account, there doesn’t seem to be a way to deposit that money into eToro; i.e. eToro recently disabled Wire transfers and Wise doesn’t support SWIFT transfers for sending USD to a bank in the US?

  • John Keys says:

    CMC Invest are an abysmal in turning around new accounts.
    Over 1 month to setup up an account with an investment trust, and still waiting. I was promised 5 business days.

  • Reg Watson says:

    Given that China’s economy is going down the toilet how the heck do we expect an appreciation of the Aussie in 2024 ? We are tied to China.

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