The current market bias for the EUR to PKR exchange rate is range-bound.
Key drivers include:
- The interest rate differential between the European Central Bank and Pakistan’s central bank is supporting the euro's stability, even as domestic inflation pressures impact the PKR.
- Positive economic growth projections for the Eurozone enhance confidence in the euro's overall performance.
- Improvements in fiscal management and remittance inflows in Pakistan help strengthen the PKR but are not enough to overshadow potential depreciation forecasts.
Over the next 1 to 3 months, the EUR/PKR is expected to trade within a stable range.
A potential upside risk for the euro could be an unexpected hawkish (aggressive) shift from the European Central Bank. Conversely, a downside risk involves accelerated inflation in Pakistan that could negatively impact market confidence in the PKR, leading to a quicker-than-expected depreciation against the euro. Recent price data shows the EUR to PKR at 328.4, slightly above its 3-month average, while ongoing global oil price volatility may also influence these dynamics.