USD/SBD Outlook: Bearish, as the rate is below its 90-day average and near recent lows, influenced by current economic pressures.
Key drivers:
- Rate gap: The US Federal Reserve has paused rate cuts, contrasting with the ongoing expansionary policy from the Central Bank of Solomon Islands, which is aimed at supporting growth.
- Risk/commodities: The US dollar is facing downward pressure due to geopolitical tensions and a trend of investors reducing exposure to U.S. assets, prompting a flight to safer alternatives.
- One macro factor: The recent approval of the Solomon Islands' sizable national budget focuses on economic transformation, which may provide support to the SBD.
Range: The USD/SBD is likely to drift within its recent 3-month range, with potential for stable movement.
What could change it:
- Upside risk: A stronger-than-expected US economic report, like the ISM manufacturing PMI, could boost the USD.
- Downside risk: Escalating geopolitical tensions could further weaken the USD against the SBD.
