The drop in EUR/AUD is a euro story first, which makes it vulnerable to a partial reversal once main Asian centres open and liquidity improves. The real test comes with the European open: French government bond spreads over Bunds and the euro’s performance against the US dollar will show whether the weekend headlines are being priced as a lasting political and fiscal risk or as a passing shock. Tuesday’s NATO council meeting is a further event risk for the euro. On the Australian side, Kent’s remarks offer the only scheduled domestic catalyst, and anything read as dovish would blunt the Aussie’s gains.

---

Earlier:

---

The Australian dollar is winning against the euro mostly by default, as Europe brings riots, drones and a trade threat to the Monday open.

Summary:

  • EUR/AUD is lower in very early Asia-Pacific trade, with flows moving out of the euro and into the Australian dollar
  • French riots over the weekend, with around 2,400 arrests, are the main weight on the euro
  • Romanian jets shooting down two drones over the Black Sea adds regional security risk, with NATO to meet on Tuesday
  • A US warning of retaliation if the EU curbs Starlink’s spectrum access adds transatlantic trade friction
  • There is little fresh Australian news, and liquidity is thin with Australian trade getting underway with earlieer trade taking place when only New Zealand was open
  • RBA Assistant Governor Christopher Kent speaks at 23:05 GMT Sunday, 19:05 US Eastern (10:05 AEDT Monday)

The euro has opened the week on the back foot against the Australian dollar, with EUR/AUD sliding in very early Asia-Pacific trade as three separate European headlines from the weekend combined to sour sentiment toward the single currency.

The biggest weight is France. A nationwide day of protest over fuel prices, wages and public services on Saturday descended into rioting, looting and arson in cities from Paris to Marseille and Limoges, with around 2,400 arrests and close to 1,000 police officers injured. President Emmanuel Macron condemned the violence but stopped short of declaring a state of emergency. For currency markets, the concern is less the damage itself than what it signals: deep social discontent in the euro area’s second-largest economy, a government with limited fiscal room to respond, and a presidential election in 2027 that the unrest has already begun to shape.

Security risk on the bloc’s eastern edge is the second factor. Romanian F-16s shot down two drones over the country’s Black Sea waters on Saturday, days after drones struck two chemical tankers off its coast. The drones’ origin has not been disclosed, and NATO allies are due to discuss the incidents at a North Atlantic Council meeting on Tuesday.

Third, transatlantic trade friction has resurfaced. The US ambassador to the EU warned European companies could face severe retaliation in the American market if Brussels presses ahead with a plan to reserve part of its satellite-to-smartphone spectrum for European operators, a move that would curb access for SpaceX’s Starlink.

There is little fresh, Australia-specific news behind the move, and it looks driven by the euro side of the cross. Early flows have favoured the Australian dollar at the euro’s expense, though with New Zealand effectively the only major centre open, liquidity is thin and early price action may exaggerate the underlying shift.

The first domestic event of note is a fireside chat with Reserve Bank of Australia Assistant Governor (Financial Markets) Christopher Kent at the Commonwealth Bank’s Global Markets Conference in Sydney, scheduled for 23:05 GMT on Sunday, 19:05 US Eastern (10:05 AEDT on Monday). Any remarks touching on the policy outlook or currency conditions would give the Australian dollar its own driver, rather than leaving it to trade purely as the beneficiary of European weakness.

Reserve Bank of Australia Assistant Governor (Financial Markets) Christopher Kent

This article was written by Eamonn Sheridan at investinglive.com.

from Investinglive RSS Breaking News Feed https://ift.tt/QtlWAGr
via IFTTT