BoA Warns Euro to Weaken Against Australian and New Zealand Dollars

Bank of America (BoA) forecasts that the euro will weaken against the Australian dollar (AUD) and New Zealand dollar (NZD) over the coming months. While the bank expects upside for both NZD/USD and AUD/USD pairs, it notes that positioning in the NZD pair appears fragile, with a similar situation for the AUD pair. Weak domestic demand in China serves as a negative factor for both currencies. Lower credit growth is exacerbating import reliance in these countries, further weakening the currencies. BoA's commodity strategists remain bullish on industrial metals and agriculture despite China concerns. The convergence of AI capital spending, energy transition risks, and weather volatility is expected to amplify supply-demand imbalances in commodity markets, potentially increasing volatility in forex markets.

Markets should proceed with caution. A weakening euro could lead to revenue losses for Australia and New Zealand from trade, while commodity price fluctuations may unsettle investors.