Foreign exchange market: The Dirham under pressure

International highlights

The Dollar supported by French political risk and a weaker Eurozone

The EUR/USD pair closed the week at 1.1202, down -0.33% from a week earlier. French political and budgetary risk, combined with disappointing macroeconomic releases in the Eurozone, supported the Dollar this week. The ZEW index for October came in at 18.5, versus forecasts of 23.6, reflecting a deterioration in the Eurozone’s economic climate. On the US side, weekly jobless claims fell by -6K, settling at 194K. Based on these developments, markets strongly anticipate a monetary status quo from both the Fed and the ECB at their monetary policy meetings scheduled this week.

MAD evolution and foreign exchange market liquidity indicators

The Dirham penalized by an unfavorable double effect

USD/MAD appreciated by +1.18% this week, settling at 9.83. This was driven by a double effect unfavorable to the Dirham. On one hand, a basket effect of +0.29%, linked to the Dollar’s appreciation on the international market. On the other hand, a liquidity effect of +0.89%, reflecting a tightening of liquidity conditions on the Moroccan interbank foreign exchange market. In this vein, liquidity spreads widened by +89 BPS, standing at +0.96% at the end of the week.

Volatility indicators

Brent higher, central banks in the spotlight

Amid persistent geopolitical tensions, Brent prices continued their climb, reaching $117/bbl over the week. This level is likely to increase the pressure on the energy bills of importing countries, particularly the Eurozone. In addition, market attention will turn to the monetary policy decisions of central banks, for which a status quo is largely anticipated. Volatility in the foreign exchange market is expected to persist. We recommend that operators hedge their positions over short-term horizons.

EUR/USD outlook – BLOOMBERG

Broker forecasts were partially revised this week. The pair is expected to trade around 1.14 in Q4-26, a level at which it should hold until Q1-27. In Q2-27, the pair is now expected at 1.14, versus 1.15 a week earlier. In Q3-27, the target remains set at 1.16. For 2027, the pair should trade around 1.16, versus 1.17 last week. Over the longer term, it is still expected at 1.17 for 2028, and at 1.17 for 2029, versus 1.18 a week earlier.

Ahead of the monetary policy decisions, this week’s macroeconomic releases pointed to a more pronounced impact on the Eurozone than on the United States. In the United States, the services PMI came in stable at 57.9 in October, reflecting solid business activity. The S&P Global Composite PMI for October came in line with the consensus, at 57.6, down slightly by -0.8 points from the previous month. In addition, continuing jobless claims rose slightly by +25K, reaching 1,728K. Based on these developments, markets strongly anticipate a monetary status quo from the Fed at its FOMC meeting scheduled this week, according to the CME FedWatch tool.

On the Eurozone side, the services PMI fell by -2.3 points in October, to stand at 51.7. The S&P Global Composite PMI for the same month stood at 51.9, a decline of -1.2 points from the previous month. Against this backdrop, investors anticipate a monetary status quo from the ECB this week, according to the ECB Watch tool.

Upward revision of our 1-month horizon forecasts 

Given the EUR/USD parity forecasts and foreign exchange market liquidity conditions, we have revised our USD/MAD projections upward for the 1-month horizon.

Broker expectations for EUR/USD point to an appreciation of the Euro against the Dollar over the 1- to 3-month horizons, relative to spot levels.

Dirham liquidity spreads, for their part, are expected to gradually narrow over the 1- to 3-month horizons, compared to current levels.

Under these conditions, target levels for the USD/MAD parity come in at 9.75, 9.79, and 9.89 over the 1-month, 2-month, and 3-month horizons, against a spot level of 9.83.

Target levels for the EUR/MAD parity come in at 11.16, 11.21, and 11.32 over the 1-month, 2-month, and 3-month horizons, against a spot level of 11.00.