EUR/PKR Outlook:
The EUR/PKR is slightly weaker but likely to move sideways, trading near recent lows and just above the 90-day average. This lack of decisive momentum could lead to stability in the near term.
Key drivers:
• Rate gap: The European Central Bank is maintaining a cautious approach to monetary policy, while Pakistan's State Bank has effectively held interest rates steady to manage inflation.
• Risk/commodities: Oil prices remain notably higher than average, influencing costs in the Eurozone and further straining the PKR due to its dependence on fuel imports.
• One macro factor: Signs of gradual economic recovery in Pakistan, alongside improved foreign exchange reserves, are providing some support for the PKR.
Range:
The EUR/PKR is expected to move within the recent stable range, not likely to test extremes immediately.
What could change it:
• Upside risk: Significant improvements in Eurozone economic indicators could bolster the euro.
• Downside risk: Renewed geopolitical tensions or further instability in oil prices could add pressure on the euro against the PKR.