Bias: The SAR/EUR exchange rate is currently bullish-to-range-bound, as it sits above the 90-day average and in the upper half of the 3-month range.
Key drivers:
• Rate gap: The Saudi Arabian central bank maintains a fixed exchange rate, offering stability against the fluctuating Euro, compounded by recent underwhelming Eurozone economic data.
• Risk/commodities: Oil prices have risen above average, which typically supports the Saudi riyal since the economy heavily relies on oil exports.
• Macro factor: The Eurozone is projected to experience slow economic growth, which could weigh on the euro's performance against other currencies.
Range: The SAR/EUR is expected to drift within its recent range, with some potential testing of the upper limits.
What could change it:
• Upside risk: A significant decline in Eurozone inflation could boost the euro.
• Downside risk: Renewed geopolitical tensions affecting energy supply may lead to decreased demand for the riyal and weaken its standing against the Euro.