The Pakistani Rupee is weakening for the fourth straight session on Wednesday. It continues to fall away from its best level in a month of 159.00, struck late last week.
At 10:15 UTC, USD/PKR is trading +0.5% higher at 161.55. This is at the upper end of the daily traded range of 160.25 – 161.60.
PKR: Pakistan Finance Ministry Forecasts -1.6% Contraction
After strengthening across the previous week, the Rupee has been paring those gains so far this week. The Rupee is extending losses after the finance ministry said that the Pakistan economy is expected to post a -1.6% contraction this fiscal year, confirming forecasts by leading global financial institutions, owing to the coronavirus pandemic. This was the first time that the ministry has endorsed economic recession forecasts from the World Bank and the International Monetary Fund.
The finance ministry also warned against easing lock down measures, which are now entering the 6th week, cautioning that an increase in the infection rate would put an unbearable strain on the health system.
The number of coronavirus cases in Pakistan rose to 14,885 on Tuesday whilst the death toll increased to 327.
USD: US GDP & Fed In Focus
The US Dollar is trading broadly lower versus its peers on Wednesday, albeit higher versus the Rupee, as investors look ahead to the release of the first quarter US GDP. Analysts expect the US economy to have shrunk at the fastest pace since the Great Recession in the first three months of this year, as the lock down measures implemented from mid-March paralysed the economy. Analysts are forecasting a -4% contraction on an annualised basis in Q1, ending the longest run of economic expansion in US history.
Following the GDP reading US Dollar investors will look ahead to the Federal Reserve monetary policy announcement. The Fed are not expected to move interest rates which they slashed to 0 last month. Neither is the Fed expected to expand its bond buying programme. Instead, investors will be looking towards the Fed for guidance. How deeply does the Federal Reserve see the US economy contracting and for how long does the Fed plan to keep interest rates at 0.
