USD/SBD Outlook:
Bearish, as the rate is below its recent average and near recent lows, facing pressure from geopolitical tensions.
Key drivers:
• Rate gap: The Federal Reserve has held interest rates steady, while the Central Bank of Solomon Islands continues an expansionary monetary policy, leading to a weaker dollar against the SBD.
• Risk/commodities: Global de-dollarization is accelerating, which reduces demand for the USD and places additional pressure on its value relative to the SBD.
• One macro factor: The "Sell America" trend is impacting USD as investors reduce their exposure to U.S. assets, driven by increasing geopolitical tensions.
Range:
The USD/SBD is expected to drift within its recent range, potentially testing the lower extremes.
What could change it:
• Upside risk: Improvement in U.S. economic indicators, such as stronger job growth or rising consumer confidence.
• Downside risk: Escalation of geopolitical tensions that directly affects trade and investment in the U.S.
