GBP/SAR Outlook:
The GBP/SAR is slightly weaker but likely to move sideways as it trades near recent lows and is just below its 90-day average. Current geopolitical tensions and emerging energy price concerns contribute to this situation.
Key drivers:
• Rate gap: The Bank of England is under pressure amid rising inflation risks while the Saudi central bank maintains its fixed exchange rate policy against the dollar.
• Risk/commodities: Recent oil price increases add inflationary pressure, which complicates UK growth prospects and weighs on the GBP.
• One macro factor: The ongoing tensions related to Iran impact global risk appetite and boost demand for safe-haven currencies over the pound.
Range:
Expect GBP/SAR to test the lower end of its recent range, currently near 5.0291, while facing downward pressures.
What could change it:
• Upside risk: A significant positive revision in forecasts from the Office for Budget Responsibility could support the pound.
• Downside risk: Continued geopolitical tensions escalating could further undermine GBP strength.