1. 10-Year Bond Yields and Interest Rate Differentials
Eurozone 10-Year Yield: ~3.2% (stable amid ECB’s cautious rate policy).
Australia 10-Year Yield: ~4.1% (higher due to RBA’s inflation focus).
Yield Spread:
4.1% (AUD)−3.2% (EUR)=+0.9%
Australia’s yield advantage supports AUD through carry trades.
Policy Rate Differential:
ECB Rate: 3.75% (cut by 25bps in June 2025).
RBA Rate: 4.35% (unchanged since late 2024).
Spread: +0.6% favoring AUD.
2. Carry Trade and Uncovered Interest Rate Parity (UIP)
Carry Trade Bias: Investors borrow EUR (lower rate) to invest in AUD (higher rate), supporting AUD demand.
UIP Implications: According to UIP, AUD should depreciate to offset its yield advantage. However, persistent AUD strength (e.g., EUR/AUD near 1.75–1.77) suggests deviations due to risk appetite and commodity-driven AUD demand.
3. Upcoming Economic Data (June 1–5)
Date Event Currency Impact
June 2 Eurozone CPI (May) Higher inflation (>2.5%) could delay ECB cuts, boosting EUR.
June 3 AU Retail Sales (Apr) Strong sales (>0.5% MoM) may lift AUD.
June 4 Eurozone Unemployment Rate Rise above 6.5% pressures EUR.
June 5 AU Trade Balance (Apr) Surplus (>A$10B) supports AUD via export optimism.
Bearish Catalysts:
Wider AU-EU yield spreads and RBA’s hawkish stance.
Strong AU data (retail sales, trade balance).
Bullish Catalysts:
ECB inflation surprises or delayed rate cuts.
Risk-off sentiment weakening AUD (commodity-linked).
Summary Table
Factor Eurozone (EUR) Australia (AUD)
10-Year Yield 3.2% 4.1%
Policy Rate 3.75% 4.35%
Yield Spread +0.9% (AUD over EUR) —
Key Data CPI, Unemployment Retail Sales, Trade Balance
Carry Trade Bias Neutral-to-Bearish for EUR Bullish for AUD
#EURAUD
Eurozone 10-Year Yield: ~3.2% (stable amid ECB’s cautious rate policy).
Australia 10-Year Yield: ~4.1% (higher due to RBA’s inflation focus).
Yield Spread:
4.1% (AUD)−3.2% (EUR)=+0.9%
Australia’s yield advantage supports AUD through carry trades.
Policy Rate Differential:
ECB Rate: 3.75% (cut by 25bps in June 2025).
RBA Rate: 4.35% (unchanged since late 2024).
Spread: +0.6% favoring AUD.
2. Carry Trade and Uncovered Interest Rate Parity (UIP)
Carry Trade Bias: Investors borrow EUR (lower rate) to invest in AUD (higher rate), supporting AUD demand.
UIP Implications: According to UIP, AUD should depreciate to offset its yield advantage. However, persistent AUD strength (e.g., EUR/AUD near 1.75–1.77) suggests deviations due to risk appetite and commodity-driven AUD demand.
3. Upcoming Economic Data (June 1–5)
Date Event Currency Impact
June 2 Eurozone CPI (May) Higher inflation (>2.5%) could delay ECB cuts, boosting EUR.
June 3 AU Retail Sales (Apr) Strong sales (>0.5% MoM) may lift AUD.
June 4 Eurozone Unemployment Rate Rise above 6.5% pressures EUR.
June 5 AU Trade Balance (Apr) Surplus (>A$10B) supports AUD via export optimism.
Bearish Catalysts:
Wider AU-EU yield spreads and RBA’s hawkish stance.
Strong AU data (retail sales, trade balance).
Bullish Catalysts:
ECB inflation surprises or delayed rate cuts.
Risk-off sentiment weakening AUD (commodity-linked).
Summary Table
Factor Eurozone (EUR) Australia (AUD)
10-Year Yield 3.2% 4.1%
Policy Rate 3.75% 4.35%
Yield Spread +0.9% (AUD over EUR) —
Key Data CPI, Unemployment Retail Sales, Trade Balance
Carry Trade Bias Neutral-to-Bearish for EUR Bullish for AUD
#EURAUD
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The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.