Currency specialists reckon Europe’s economy will wear the Iran war energy shock much more heavily than Australia’s, tilting the exchange rate in favour of the Aussie.
For travellers eyeing a European summer, every extra cent at the counter suddenly matters. Forecasters argue the Middle East conflict hits Europe harder because the region leans heavily on imported energy, which drags more sharply on growth than in Australia.
That relative weakness is expected to chip away at the euro’s value against the Australian dollar over the year. As the growth gap widens, the currency gap is tipped to follow, giving Australians a bit more room in their travel budgets.
Market analysts at Westpac highlight that the euro has been behaving oddly for some time, trading stronger than the underlying economic data would suggest. They point out the currency has stayed overvalued since around April last year, when US trade policy shifts, described as “liberation day” tariffs, jolted global markets.
Those tariffs distorted capital flows and risk sentiment, helping to prop up the euro even as Europe’s fundamentals weakened. The new energy shock from the Iran war now adds another weight, making a correction towards a weaker euro more plausible.
