EUR/MYR Outlook: Slightly weaker, but likely to move sideways, as the rate is below its recent average and exhibits mixed signals.
Key drivers:
• Rate gap: The European Central Bank is cautious with monetary policy, leaving the euro vulnerable compared to Bank Negara Malaysia's stable interest rate.
• Risk/commodities: OIL is trading significantly above its average, which may bolster the MYR due to Malaysia's reliance on oil exports, although it's creating volatility.
• One macro factor: Malaysia's economy grew by 5.7% in the last quarter, exceeding forecasts and enhancing the appeal of the ringgit.
Range: EUR/MYR is expected to drift within its recent 3-month range due to current pressures and lack of strong directional drivers.
What could change it:
• Upside risk: A stronger than expected rebound in eurozone retail sales data could lift the euro.
• Downside risk: Continued US dollar strength could pressure the euro further without additional support.