USD/PKR Outlook:
Slightly weaker, but likely to move sideways as the USD is below its recent average and within a stable range.
Key drivers:
• Rate gap: The Federal Reserve's decision to hold interest rates has put downward pressure on the USD, contrasting with the PKR's depreciation influenced by geopolitical tensions.
• Risk/commodities: The USD's recent declines can be linked to escalating geopolitical tensions affecting risk appetite, which may dampen demand for safe-haven currencies like the USD.
• One macro factor: Ongoing economic pressures in Pakistan, including high inflation and reduced trade activities, have contributed to the PKR's decline, putting additional stress on the currency.
Range:
Expect USD/PKR to move within its recent range, holding steady as pressure from the USD weakens.
What could change it:
• Upside risk: A significant reduction in geopolitical tensions could boost the PKR's value.
• Downside risk: Further deterioration of the US economy might lessen demand for the USD but unlikely due to current market dynamics.
