Bias: The EUR/PKR pair is currently bearish-to-range-bound, as it is just below the 90-day average and in the lower half of the 3-month range.
Key drivers:
• Rate gap: The European Central Bank's cautious monetary stance contrasts with the Pakistani central bank's attempts to stabilize the PKR, potentially widening the rate differential.
• Risk/commodities: Oil prices are currently above their average, which may lend the PKR some support, as higher oil costs can affect Pakistan's trade balance negatively.
• Macro factor: Slowdown in Eurozone retail sales, along with contraction in German exports, casts doubt on the euro’s recovery and may limit its appreciation.
Range: EUR/PKR is likely to hold around current levels within its recent range but might drift slightly lower if economic conditions do not improve.
What could change it:
• Upside risk: A stronger-than-expected economic recovery in the Eurozone could improve the euro's value.
• Downside risk: Continued economic pressure in Pakistan or high inflation could further weaken the PKR, leading to broader depreciation against the euro.
