EUR/IDR Outlook:
The outlook for EUR/IDR is slightly positive, but likely to move sideways as it trades above its three-month average and near recent highs without a clear driver supporting a stronger increase.
Key drivers:
- Rate gap: The European Central Bank has maintained its interest rates at 2%, while Bank Indonesia recently lowered its key rate to prioritize economic growth, suggesting wider interest rate divergence.
- Risk/commodities: Oil prices are rising, currently above average, which can support the euro through positive global economic sentiment as energy costs impact both currencies differently.
- One macro factor: Political uncertainty regarding Bank Indonesia's policy independence may affect confidence in the rupiah, driving more weakness.
Range:
EUR/IDR is likely to test extremes within its current range, drifting around recent highs but staying confined.
What could change it:
- Upside risk: A more hawkish ECB signal could strengthen the euro further.
- Downside risk: Increased capital outflows from Indonesia or worsening economic conditions could further weaken the rupiah.
