SAR/PKR Outlook:
Slightly positive, but likely to move sideways, as the rate is near its 3-month average with mixed drivers at play.
Key drivers:
• Rate gap: The Saudi central bank maintains a stable peg against the U.S. dollar, while the Pakistani central bank faces challenges due to geopolitical tensions impacting the PKR.
• Risk/commodities: Recent upward movement in oil prices may support the SAR, given its association with the country's oil revenue, but volatility persists.
• One macro factor: Ongoing high inflation in Pakistan is eroding the PKR's value, which markets anticipate will hinder recovery efforts.
Range:
Expect the SAR/PKR to hold within its recent stable range, potentially testing extremes based on evolving economic conditions.
What could change it:
• Upside risk: A significant improvement in security and trade relations could strengthen the PKR.
• Downside risk: Continued geopolitical tensions and inflation pressures may push the PKR lower against the SAR.
