USD/MAD: The dirham gains strength against the dollar

International highlights

EUR/USD rebounds after five weeks of decline, driven by a less hawkish Warsh

After five consecutive weeks of decline, the EUR/USD appreciated by +0.35% this week, reaching 1.1239. Despite favorable macroeconomic releases, Kevin Warsh’s less restrictive tone on the side-lines of the annual International Monetary Fund (IMF) the World Bank meetings weighed on the Dollar at the end of the week. September’s annual CPI came in at 3.7%, exceeding the consensus of 3.6%, confirming the persistence of inflationary pressures in the United States. Jobless claims rose slightly by +1K, reaching 199K. One week ahead of the monetary policy meetings, markets continue to anticipate a status quo from both the Fed and the ECB.

MAD evolution and foreign exchange market liquidity indicators

The Dirham benefits from easing liquidity conditions

USD/MAD continues its decline, with a sharp drop of -1.37% this week, reaching 9.72 at the weekly close. This move was driven by a double effect in favor of the Dirham this week. The liquidity effect came in at -1.18%, reflecting an easing of Dirham liquidity conditions on the Moroccan interbank foreign exchange market for the second consecutive week. The basket effect, for its part, stood at -0.19%, in line with the Dollar's depreciation on the international market. Against this backdrop, liquidity spreads stood at +0.07%, reflecting a narrowing of -120 bps.

Volatility indicators

Middle East tensions reignite inflationary pressures

Renewed escalations in the Middle East revived inflationary pressures, pushing Brent prices to $110/bbl, up + 5% over the week. In this vein, inflation figures, still trending upwards (3.8% for the Eurozone and 3.7% for the United States), confirm the impact of higher energy prices on both economies. Against this backdrop, volatility remains elevated in the foreign exchange market. We therefore 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, versus 1.15 last week. In Q1-27, the target has now been lowered to 1.14, versus 1.15 a week earlier. In Q2-27, the pair should remain stable at 1.15. In Q3-27, the target is still set at 1.16. For 2027, the pair should trade around 1.17. Over the longer term, it is now expected at 1.17 for 2028, versus 1.18 a week earlier, and at 1.18 for 2029, versus 1.20 last week.

In the United States, CPI for September came in at 3.7%, versus forecasts of 3.6%, confirming the persistence of inflationary pressures on the US economy. Existing home sales stood at 3.99M in September, versus a consensus of 3.95M, reflecting a slight recovery in the housing market. In addition, continuing jobless claims fell slightly by -4K, to stand at 1,710K. Based on these developments, investors strongly forecast a monetary status quo from the Fed at the October FOMC meeting, according to the CME Fed Watch tool.

On the Eurozone side, annual CPI rose by +0.6 points, to stand at 3.8%, confirming the impact of the higher energy bill on the zone's economy. Monthly industrial production came in at -0.5% in August, versus forecasts of 0%. Against this backdrop, expectations point strongly toward a monetary status quo from the ECB at its October monetary policy meeting, according to the ECB Watch tool.

Downward revisions of our forecasts at the 2-month horizon

Given the EUR/USD parity forecasts and foreign exchange market liquidity conditions, we have revised our USD/MAD projections downward for the 2-month horizons.

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 9.70, 9.79, and 9.89 over the 1-month, 2-month, and 3-month horizons, against a spot level of 9.72.

Target levels for the EUR/MAD parity come in at 11.10, 11.21, and 11.32 over the 1-month, 2-month, and 3-month horizons, against a spot level of 10.93.