International Highlights
Key rate : ECB decides a monetary pause in July
The EUR/USD pair appreciated by 1.00% this week, from 1.1626 to 1.1742. The European Central Bank (ECB) decided this week to keep its key interest rates unchanged while awaiting more clarity on future trade relations between the EU and the United States. As the August 1 deadline approaches, the President of the European Commission announced a meeting on Sunday in Scotland with US President Trump. This would involve negotiating a new trade agreement with 15% tariffs on imported European products instead of the 30% which would apply after the deadline if negotiations fail.
MAD evolution and foreign exchange market liquidity indicators
Liquidity spreads at historic lows
The USD/MAD depreciated by -0.54%, falling from 9.04 to 9.00 this week. This weekly variation was driven by a double negative effect in favor of the Dirham. On the one hand, a basket effect of -0.49% after the appreciation of the Euro against the Dollar this week. On the other, a liquidity effect of -0.05% following a slight easing of liquidity conditions for the Dirham this week. Liquidity spreads thus eased by -5 BPS to -4.88%. These levels remain at their lowest levels in more than three years, thanks to lower import flows due to the decrease of energy prices.
A volatility fueled by trade tensions
As the August 1st deadline approaches, trade uncertainties, particularly between the United States and China and the EU, are fueling volatility in the EUR/USD pair. In this context of high uncertainty, significant volatility is expected in the short-term. We recommend traders to hedge their trades over time horizons from 1 month to 3 months.
EUR/USD outlook – BLOOMBERG
Brokers' forecasts for the EUR/USD pair were broadly stable this week. The pair is expected to reach 1.17 in Q3-25. It is expected to rise to 1.18 in Q4-25, compared to 1.17 a week earlier. In Q1-26, it is expected to reach 1.19 and remain at this level in Q2-26 before rising to 1.20 in 2026. In 2027, the target level is 1.20. In 2028, the target is 1.22, compared to the initial 1.21.
In the United States, inflation stood at 2.7% in June, after 2.4% in May. Faced with trade uncertainties, the Fed is expected to decide to maintain the Fed Funds rate in the [4.25% - 4.50%] range in July. A trade agreement between the United States and Japan has been reached this week, with tariffs of 15% instead of 25% on Japanese imports. A similar agreement is expected this weekend with the EU, but trade negotiations with China are expected to extend beyond the August 1st deadline. In this still uncertain environment, markets are forecasting a Fed Funds rate cut of -25 BPS in both September and December 2025. In the Eurozone, inflation stood at 2.0% in June, after 1.9% in May. Despite this slight increase, inflation remains in line with the ECB's 2% target. The ECB decided a monetary pause in July, ending a year of monetary easing while awaiting greater clarity on the EU's future relations with the US. A final ECB rate cut in 2025, however, remains likely.
Downward review of our 1 month, 2 months and 3 months horizon forecasts
Given the EUR/USD exchange rate forecasts and liquidity conditions in the foreign exchange market, we have reviewed our USD/MAD exchange rate forecasts downwards for the 1-month, 2-month, and 3-month horizons. Brokers' EUR/USD exchange rate forecasts favor a depreciation of the euro against the dollar over the 3-month horizon compared to spot levels.
MAD liquidity spreads are expected to tighten very slightly relative to spot levels over the 1-month and 2-month horizons, and then tighten slightly again over the 3-month horizon.
Under these conditions, the target levels for the USD/MAD exchange rate are:
- 9,01 in 1 month
- 9,01 in 2 months
- 9,04 in 3 months
compared to a spot rate of 9.00
The target levels for the EUR/MAD exchange rate are
- 10,57 in 1 month
- 10,57 in 2 months
- 10,61 in 3 months
against a spot level of 10.56
