According to Peter Dragicevich, Research Analyst at Nomura, after following the pull-back in the wake of the cautious October ECB meeting, EUR is recovering.

Key Quotes

“Although eurozone inflation pressures are subdued, the underlying growth pulse in the eurozone economy remains positive, and longer-term expectations for further ECB policy normalisation remain entrenched. The eurozone measure remains positive. And shifts in the longer-term eurozone-Australian nominal swap spreads (i.e. 10yr and 20yr) continue to underpin the moves in EUR/AUD. EUR (and EUR crosses) should become more correlated to swings in long-end interest rates as the policy normalisation sequence unfolds.” 

“The flow dynamics also remain EUR positive, with the eurozone current account surplus (over 3% of GDP) an ongoing source of structural currency support. Within that, the nonseasonally adjusted eurozone current account data show the surplus is, on average, at its largest in December. Coincidentally, there has also been a propensity for EUR/AUD to appreciate towards the end of the calendar year. EUR/AUD has appreciated in December in 13 of the past 17 years, with the bulk of the moves tending to occur in the first three weeks of the month.”