SGD/PKR Outlook:
Slightly weaker, but likely to move sideways, as the rate is near recent lows and just above the average.
Key drivers:
• Rate gap: The Monetary Authority of Singapore has adopted a more accommodative stance, while the State Bank of Pakistan faces significant inflationary pressures and geopolitical tensions impacting the PKR.
• Risk/commodities: Recent geopolitical tensions have led to a decline in the PKR, impacting its stability against the SGD.
• One macro factor: The IMF's agreement with Pakistan is providing some market confidence, but high inflation continues to erode the PKR's purchasing power.
Range:
Expect the SGD/PKR to hold within its recent stable range as external pressures mount for the PKR.
What could change it:
• Upside risk: A recovery in trade relations or improved economic performance in Singapore could support the SGD.
• Downside risk: Further deterioration in geopolitical conditions or inflation in Pakistan could weaken the PKR against the SGD.