USD/UAH Outlook:
The USD/UAH rate is currently trading at about 43.81, which is 2.2% above its 3-month average. This suggests that the USD is likely to increase amid ongoing geopolitical tension and strong safe-haven demand.
Key drivers:
• Rate gap: The US Federal Reserve's monetary policy is viewed as more assertive compared to the National Bank of Ukraine’s continued high rates.
• Risk/commodities: Oil prices have surged due to fears of supply disruptions, increasing demand for USD as oil is priced in USD.
• One macro factor: The Ukrainian government's budget projections suggest potential long-term weakening of the UAH, adding to currency pressure.
Range:
The USD/UAH is expected to hold around current levels as it remains at recent highs, with potential fluctuations within the established range.
What could change it:
• Upside risk: A major escalation in geopolitical conflicts could further boost safe-haven demand for the USD.
• Downside risk: Progressive stabilization in the Ukrainian economy, leading to stronger UAH sentiment, could put pressure on the USD.
