SAR/EUR Outlook:
Slightly weaker, but likely to move sideways as the SAR is below its recent average and near recent lows.
Key drivers:
• Rate gap: The Saudi Arabian Monetary Authority maintains a fixed exchange rate, supporting the SAR against the EUR, but the ECB's recent rate maintenance could add pressure to the EUR.
• Risk/commodities: Oil is currently trading above its average, which typically strengthens the SAR as the economy relies on oil revenues, but market volatility may counterbalance this effect.
• One macro factor: Eurozone inflation has eased to 1.7%, raising questions about the future direction of ECB monetary policy, which could impact the EUR's strength.
Range:
Movement in SAR/EUR is likely to hold within its recent range as external factors stabilize.
What could change it:
• Upside risk: A significant rise in oil prices could enhance the SAR.
• Downside risk: A sharper decline in Eurozone economic performance could weaken the EUR further.