Bias: The EUR/XCD outlook is range-bound as it is near the 90-day average and within the middle of the 3-month trading range.
Key drivers:
- Rate gap: The European Central Bank is likely to maintain a neutral policy, while the Eastern Caribbean Central Bank focuses on macroeconomic stability, keeping rates steady.
- Risk/commodities: Recent oil prices have been volatile, currently above average, creating potential upward pressure on currencies tied to energy prices, impacting the Euro in particular.
- One macro factor: Eurozone inflation is projected to decrease, possibly stabilizing the euro and making it less vulnerable to negative economic news.
Range: The EUR/XCD is expected to hold steady within its recent range as both currencies face distinct economic challenges.
What could change it:
- Upside risk: A positive surprise in Eurozone economic data could strengthen the euro.
- Downside risk: Continued declines in tourism-related economies across the Caribbean could pressure the XCD lower against the euro.