PKR/USD Outlook: Slightly positive, but likely to move sideways, as the current rate is above its 90-day average, showing limited clear drivers for movement.
Key drivers:
• Rate gap: The State Bank of Pakistan maintains its key policy rate at 10.5%, which is considerably higher compared to anticipated cuts in US rates.
• Risk/commodities: The volatility in oil prices, along with geopolitical tensions involving the US, is putting pressure on the dollar, indirectly supporting the PKR.
• One macro factor: Fitch Ratings predicts the PKR will weaken in the coming months due to expected current account pressures, which adds uncertainty.
Range: The PKR/USD is likely to drift within its recent range as current conditions lack strong catalysts for a significant move in either direction.
What could change it:
• Upside risk: A sudden improvement in foreign investment or remittances could strengthen the PKR.
• Downside risk: A marked escalation in geopolitical tensions could further weaken the USD, impacting its value against the PKR negatively.
