Forex Flash: EUR/AUD supportive in the long term – ANZ

FXstreet.com (Barcelona) - “Based on that outlook the time is ripe to unwind short-term exposures. That being said, fundamental underpinnings remain supportive for longer-term strength in the EUR/AUD.” notes FX Strategist Andrew Salter at ANZ. The flip side to devastatingly high euro zone unemployment rates are moderating unit labor costs and increased productivity. Current account balances are reflecting this increase in competitiveness.

Trade flows are a buoy for endemic pessimism among investors. Australian dollar fundamentals are moving in the other direction. Throughout the recent mining boom, mining earnings were re-invested to pay for expanding production capacity. Because most of the industry is foreign owned, this method of financing also meant an absence of earnings flowing out of the economy and therefore limited downward pressure on the Australian dollar.