USD/PKR Steady as Trade Deal Uncertainty Continues, US NFP Eyed Next

USD/PKR was up 0.25% to 155.085 in late Asian session on Friday.

USD/PKR remained range bound around the 155 mark on Thursday, showing little reaction to US macro data. The number of Americans claiming unemployment assistance fell by 10 000 to 203 000 during the week ended December 1st. The numbers were well below expectations of 215 000.

A separate report by the Bureau of Economic Analysis showed US trade deficit had shrunk to USD 47.2 billion in October. This marked the lowest gap since May 2018. Market expectations had pointed to a smaller drop.

The lack of clarity regarding a “phase-one” US-China trade agreement persisted, as conflicting headlines continued to emerge. China’s commerce ministry was reported to have maintained its stance that tariffs have to be reduced if Beijing and Washington are to ink an interim trade agreement.

Investor expectations of a rate cut by Fed were slightly higher. According to CME’s FedWatch Tool, as of December 5th, investors saw a 26.6% chance of a rate cut occurring at the Federal Reserve’s policy meeting in March, up from 22.2% a day ago.

Meanwhile, Moody’s maintained the Pakistani government’s local and foreign currency long-term issuer and senior unsecured debt ratings at B3 and also upgraded outlook from negative to stable. The agency cited a number of measures, including step devaluations of PKR exchange rate that culminated in the transition of the exchange rate regime to a market-based system in May.

An environment of attractive interest rates and improving balance of payments is likely to support PKR valuation.

The US Dollar Index was little changed at 97.355 in late Asian trade on Friday, not far from yesterday’s fresh one-month low (97.320).

Today’s market focus will be on the more comprehensive non-farm payrolls report, which reflects employment in the US public and private sectors. Employers in all segments of economy, excluding the farming industry, probably added 180 000 new jobs in November, according to market expectations, after a job gain of 128 000 in October. Slower-than-expected job growth in November would have a considerable bearish effect on USD, because of negative implications regarding labor market strength and consumer spending respectively.

Meanwhile, the rate of unemployment in the country probably remained stable at 3.6% in November, according to estimates. The official government report is due out at 13:30 GMT.

Additionally, the monthly survey by Thomson Reuters and the University of Michigan may show that consumer confidence in the US continued to improve in December.

The preliminary reading of the consumer sentiment index probably rose to 97.0 in December from a final 96.8 in November. In case the gauge met or even exceeded expectations, this would support USD demand due to positive implications regarding consumer expenditures. The report is expected at 15:00 GMT.

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