The Pakistani Rupee is creeping lower versus the US Dollar on Wednesday. The Rupee settled on Tuesday mildly stronger +0.05% at 160.29.
At 10:07 UTC, USD/PKR is trading up +0.4% at 160.95. This is mid-way between the daily traded range of 159.37 – 161.02, a two-week high.
PKR: Think Tanks Warns of -5.5% GDP Contraction
The Pakistan Rupee is under pressure following a report that the country’s economy could contract by up to 5.5% this year. This projection by think tank Lahore School of Economics is significantly worse than the -1.5% contraction which international institutions have estimated.
A GDP contraction of -5.5% is expected should the lockdown measures in Pakistan continue through until November, this is considered a worse case scenario. The same think tank predicted that a three month lock down would result in a -2.9% contraction in GDP growth as Pakistan’s economy experiences an evaporation in demand not just domestically by also internationally.
Looking ahead, investors will move their attention to monetary policy. The State Bank of Pakistan’s monetary policy committee will meet on Friday. The meeting comes amid growing concern over the impact of the coronavirus crisis on the Pakistan economy. The central bank has previously slashed rates by 425 basis points in March and April.
USD: Fed Jerome Powell’s Speech In Focus
The US Dollar is showing resilience after slipping lower in the previous session. Investors are looking cautiously ahead to Federal Reserve Chairman Jerome Powell’s speech later today. His speech comes after data revealed that US inflation dived -0.8% in April, the biggest drop since the Great Recession, fuelling speculation that the Federal Reserve will take interest rates negative.
So far, Federal Reserve speakers have pushed back on the concept of negative interest rates owing to the impact that they would have on the financial sector. The broad expectation is that Jerome Powell will follow in the footsteps of his colleagues and dash any hopes of negative rates, even though President Trump is keen for the Fed to move rates into negative territory.
On the economic calendar US producer price index, which measures inflation at wholesale level could attract some attention. Analysts are expecting producer prices to remain flat in April compared to the previous month.