USD/UAH Outlook: Slightly positive, but likely to move sideways, as the rate is above its recent average and lacks a clear driver.
Key drivers:
• Rate gap: The Federal Reserve is expected to enact significant rate cuts in the coming years, while the National Bank of Ukraine maintains a high policy rate to control inflation.
• Risk/commodities: The oil market remains volatile, which can influence the USD—higher oil prices generally weaken the USD as they affect trade balances.
• One macro factor: A recent interest-free loan from the EU could bolster Ukraine’s financial stability, affecting the UAH favorably.
Range: The USD/UAH is likely to drift within its recent range without testing the extremes.
What could change it:
• Upside risk: A surprising uptick in the core PCE price index could prompt a shift in Federal Reserve policy expectations.
• Downside risk: Renewed geopolitical tensions may create downward pressure on the USD.
