USD/PKR Outlook: Slightly weaker, but likely to move sideways, as the rate is below its recent average and lacks a clear driver to push it significantly in either direction.
Key drivers:
• Rate gap: The Federal Reserve's anticipated rate cuts may reduce USD strength, contrasting with the State Bank of Pakistan’s efforts to stabilize the PKR.
• Risk/commodities: Oil prices remain stable, which can help the PKR as lower commodity prices may ease inflation pressures.
• One macro factor: Pakistan's ongoing privatization efforts are expected to gradually support the PKR despite forecasts of mild depreciation throughout the year.
Range: The USD/PKR likely will drift within its recent range, with limited movement expected.
What could change it:
• Upside risk: Stronger-than-expected U.S. labor market data could give the USD a boost if it impacts Federal Reserve rate cut expectations.
• Downside risk: If inflation in Pakistan rises faster than anticipated, it could lead to a weaker PKR outlook and increased depreciation.
