USD/SBD Outlook: Likely to decrease, as the rate is below its recent average and near recent lows, with concerns about USD strength as a key factor.
Key drivers:
• Rate gap: The Federal Reserve is expected to cut rates, while the Central Bank of Solomon Islands maintains an expansionary monetary policy to support growth.
• Risk/commodities: Current oil prices have remained stable, which tends to have a limited immediate effect on the SBD's valuation.
• One macro factor: The recent approval of the Solomon Islands’ national budget aims to stimulate economic growth, which can provide some support for the SBD.
Range: The USD/SBD is likely to drift within the recent range as it trades near 90-day lows.
What could change it:
• Upside risk: A surprising increase in US inflation data could shift expectations for Fed rate cuts and strengthen the USD.
• Downside risk: If the Solomon Islands' economic growth proves robust, it may provide upward pressure on the SBD against the USD.
