PKR/USD Outlook:
Slightly positive, but likely to move sideways as the rate is above its recent average and near recent highs without a clear driver.
Key drivers:
• Rate gap: The Pakistani Central Bank's efforts to stabilize the rupee contrast with the U.S. Federal Reserve's steady interest rates, affecting the PKR's performance.
• Risk/commodities: The recent rise in oil prices could benefit the PKR by improving trade balances, but its recent 12% depreciation against the USD limits benefits.
• One macro factor: Ongoing geopolitical tensions have led to significant PKR depreciation, undermining recovery efforts despite recent improvements.
Range:
Expect the PKR/USD to test its recent range, maintaining stability but facing challenges to break out of current levels.
What could change it:
• Upside risk: A reduction in geopolitical tensions may boost the PKR and enhance investor confidence.
• Downside risk: Continued inflationary pressures and unfavorable trade dynamics could weaken the PKR further.
