Bias: The PKR/USD is currently bullish-to-range-bound, as it sits above the 90-day average and in the upper half of the 3-month range.
Key drivers:
• Rate gap: The State Bank of Pakistan's interest rates remain higher than the Federal Reserve's, supporting the PKR against the USD.
• Risk/commodities: Oil prices have stabilized above average, which is beneficial for the PKR given Pakistan's reliance on oil imports.
• One macro factor: Inflation is projected to remain moderate in Pakistan for the fiscal year, potentially easing pressure on the PKR.
Range: The PKR/USD is likely to drift within its recent range, possibly consolidating around current levels.
What could change it:
• Upside risk: A hawkish signal from the Federal Reserve regarding interest rates could strengthen the USD.
• Downside risk: A significant deterioration in Pakistan's economic indicators could lead to increased depreciation of the PKR against the USD.