EUR/XCD Outlook:
Slightly positive, but likely to move sideways as the euro trades above its recent average without a clear driving factor.
Key drivers:
• Rate gap: The European Central Bank's decision to maintain interest rates supports the euro while the East Caribbean Central Bank continues its fixed exchange rate policy with the US dollar.
• Risk/commodities: Rising oil prices may bolster the euro due to improved economic sentiments in Europe, while the East Caribbean Dollar remains stable.
• One macro factor: Decreasing Eurozone inflation, now below target, could lead to uncertainty for future interest rates, creating mixed signals for the euro.
Range:
The EUR/XCD is likely to drift within its recent range, reflecting a stable trading environment.
What could change it:
• Upside risk: A significant increase in Eurozone economic growth could support euro appreciation.
• Downside risk: A prolonged decrease in Eurozone inflation or global economic concerns could pressure the euro lower.