CAD/PKR Outlook: Slightly positive, but likely to move sideways as the rate is above its recent average and lacks a clear driver.
Key drivers:
• Rate gap: The Bank of Canada is maintaining a policy rate that suggests confidence in managing inflation, while the State Bank of Pakistan is focused on inflation control with a higher policy rate, indicating divergent monetary policies.
• Risk/commodities: Oil prices are currently above average levels, benefiting the CAD as Canada is a significant oil exporter, although the extent of this benefit is uncertain given the overall economic context.
• One macro factor: Fitch Ratings predicts potential pressures on the PKR, anticipating it could weaken further by mid-year due to current account challenges.
Range: The CAD/PKR is likely to drift within its recent range, reflecting the mixed signals from both economies.
What could change it:
• Upside risk: A significant rise in oil prices could further strengthen the CAD.
• Downside risk: Heightened geopolitical tensions affecting trade and currency flows could weaken the PKR significantly.
