SAR/GBP Outlook:
Slightly weaker, but likely to move sideways as the rate is below its recent average and near recent lows.
Key drivers:
- Rate gap: The Saudi Central Bank's fixed exchange rate mechanism keeps the riyal stable against the US dollar, affecting its relative value to the pound.
- Risk/commodities: Ongoing fluctuations in oil prices have caused uncertainty, which tends to influence the Saudi riyal, given that oil is a key revenue source for the country.
- One macro factor: Recent political jitters and a dovish tone from the Bank of England following its interest rate decision dampen confidence in the GBP.
Range:
SAR/GBP is likely to drift within its recent 3-month range, given current pressure.
What could change it:
- Upside risk: A strengthening of the pound, fueled by better-than-expected UK economic indicators, could bolster the rate.
- Downside risk: Further declines in oil prices or negative news affecting the UK’s political landscape may weaken the GBP, dragging down the SAR/GBP exchange rate.