SAR/EUR Outlook: Slightly weaker, but likely to move sideways, as the rate is currently below its 90-day average and trading near recent lows without a clear driver.
Key drivers:
• Rate gap: The Saudi central bank maintains a fixed exchange rate against the U.S. dollar, which keeps the SAR stable but limits its reaction compared to the EUR influenced by ECB policies.
• Risk/commodities: Oil prices are reaching recent highs, which generally supports the SAR; however, the current high volatility may complicate the outlook for the currency pair.
• Macro factor: The Eurozone’s projected decline in inflation indicates less urgency for the ECB to change interest rates, maintaining pressure on the euro's value.
Range: The SAR/EUR pair is likely to drift within its recent range, as it is currently positioned lower.
What could change it:
• Upside risk: A significant increase in oil prices could strengthen the SAR against the EUR.
• Downside risk: If Eurozone economic growth slows more than expected, it could weaken the euro and shift the outlook for the pair.
