The recent performance of the EUR to PHP exchange rate reflects a mix of geopolitical and economic factors impacting both currencies. As of now, the euro is trading at around 68.34 PHP, marking a 7-day high and a 1.4% increase above its three-month average of 67.4. This stability has seen the EUR/PHP pair fluctuate within a range of 65.92 to 68.87 in the past three months.
The euro has been buoyed by investors' optimism regarding the European Central Bank's (ECB) interest rate policy. Analysts have noted that while the ECB raised rates to 4.0% in 2024 to combat inflation, it appears to be pivoting towards a dovish approach in response to slowing growth, with forecasts indicating a potential reduction to 3.5% by late 2025. This sentiment is contrasted by the expectation that the Bangko Sentral ng Pilipinas (BSP) may cut interest rates due to subdued inflation in the Philippines, which held steady at 1.7% in October. The potential for a 25-basis-point rate cut by the BSP in December could further weaken the Philippine peso.
Furthermore, ongoing geopolitical tensions stemming from the conflict in Ukraine continue to impact the euro's stability. The EU's position and economic recovery efforts are closely analyzed, especially as circumstances evolve. Analysts suggest that a resolution to these tensions could support the euro's recovery, whereas prolonged conflict might undermine it.
Meanwhile, the Philippine peso has faced challenges, including a depreciation to record lows against the US dollar amid economic concerns tied to infrastructure spending and expectations of ongoing rate cuts from the BSP. The peso has been characterized as overvalued, affecting export competitiveness and contributing to a trade deficit, estimated at around $43 billion or 10% of GDP. Remittances from Overseas Filipino Workers (OFWs), totaling $34 billion in 2024, provide some support for the currency, but broader economic challenges persist.
Oil price movements are also relevant in this context, as fluctuations can influence both currencies. Currently, crude oil prices sit near $65.16 per barrel, just 1% below a three-month average, within a volatile range of $60.96 to $70.13. Sustained high oil prices could impact inflation rates and economic activities in both the Eurozone and the Philippines, adding another layer of complexity to exchange rate forecasts.
Overall, the forthcoming weeks may see the euro maintain its strength relative to the Philippine peso depending on ECB policy signals and stabilization of the geopolitical landscape, while the peso’s performance will likely hinge on domestic economic conditions and changes in monetary policy from the BSP.
