Bias: The EUR/PHP pair is currently bullish-to-range-bound as it trades above the 90-day average and within the upper half of the 3-month range.
Key drivers:
- Rate gap: The European Central Bank (ECB) is maintaining a neutral policy stance while the Bangko Sentral ng Pilipinas (BSP) is expected to ease rates, widening the interest rate differential to favor the euro.
- Risk/commodities: Oil prices have seen recent gains, which may support the Philippine peso, as rising fuel costs impact inflation and can influence currency valuations.
- Macro factor: The Philippines is experiencing a deteriorating balance of payments, posing challenges for the peso amid external pressures.
Range: The EUR/PHP is likely to drift within its recent stable range but may see attempts to test the higher levels.
What could change it:
- Upside risk: Any improvement in Eurozone economic data or ECB signals of tightening policy could strengthen the euro further.
- Downside risk: A significant escalation in geopolitical tensions or weak economic indicators from Germany could pressure the euro downwards.