USD/PKR Outlook: The outlook is slightly positive, but likely to move sideways, as the rate is above its recent average and near recent highs, but lacks a clear driver for further strength.
Key drivers:
• Rate gap: The Federal Reserve's decision to pause rate cuts supports a stable dollar, contrasting with the State Bank of Pakistan's maintained key rate.
• Risk/commodities: Oil prices have remained relatively stable, which helps maintain PKR strength given its impact on the Pakistani economy.
• One macro factor: The Fitch Ratings forecast indicates potential deterioration in the PKR value by mid-year, contributing to uncertainty.
Range: Expect the USD/PKR to hold within its recent range, with potential for minor fluctuations rather than significant movements.
What could change it:
• Upside risk: Strong U.S. economic data, like an improvement in manufacturing activity, could bolster the USD further.
• Downside risk: Continued geopolitical tensions affecting trade could weaken the PKR and heighten volatility.
