Bias: The outlook for USD/UAH is bullish-to-range-bound, as the currency is currently above the 90-day average and in the upper half of the 3-month range.
Key drivers:
- Rate gap: The Federal Reserve is expected to lower interest rates, while the National Bank of Ukraine maintains a high key policy rate to control inflation, supporting the UAH.
- Risk/commodities: Recent volatility in oil prices can influence the UAH, as higher oil costs typically strain Ukraine's economy, making the currency more vulnerable.
- Economic growth projections: With forecasts of modest GDP growth in Ukraine, the UAH may receive support from improved economic conditions, but significant challenges remain.
Range: The USD/UAH is likely to drift within the recent range as it consolidates near its current high.
What could change it:
- Upside risk: Strong economic data from the U.S. could lead to greater USD demand, pushing the exchange rate higher.
- Downside risk: A surprise interest rate cut by the Federal Reserve could weaken the USD, impacting the exchange rate negatively.
