- Pakistani Rupee declines in risk off trading
- OECD warned that global economy could contract -6% & Pakistan car sales plunge
- US Dollar rises on safe have flows after Fed’s cautious outlook
- At 09:15 UTC, US Dollar to Pakistani Rupee (USD/PKR) trades +0.25% at 165.05
Fears over the global economic impact of coronavirus is sending the Pakistani Rupee lower for a third straight session on Thursday. The Rupee settled -0.5% at 164.63 on Wednesday, after starting this week at 162.87.
At 09:15 UTC, USD/PKR trades +0.25% at 165.05. This is at the upper end of the daily traded range of 163.87 – 165.05 amid a broad risk off climate across financial markets.
Yesterday the OECD warned that the global economy will contract by -6% this year with an unprecedented loss of income and amid extraordinary uncertainty caused by the lockdown measures to contain the coronavirus outbreak. Economies across the globe have been paralysed by the measures taken to stem the pandemic. Risk sentiment declined dragging on demand for riskier currencies such as the Rupee.
Domestic data in Pakistan showed that the automobile sector was hammered in May as car sales plunged 75% on a year on year basis, due to the lockdown. Sales dropped to 4,473 units in May compared to 17,781 in the same month last year. This is just the latest in mounting evidence of the huge impact that covid-19 has had on the economy.
The US Dollar is advancing across the board on increased safe have flows following the Federal Reserve monetary policy announcement. As expected, the Fed kept interest rates at 0 and monetary policy unchanged. The Fed also gave its first forecast since the start of the coronavirus outbreak, warning that the US economy will contract -6.5% this year, whilst unemployment will be 9.5%. The Fed said that it will keep interest rates at 0 until the labour market recovers in 2022.
The Fed’s statement dashed hopes of a quick recovery and fuelled safe haven flows as investors focused on the gloomy outlook rather than the ongoing support from the Fed.
Investors will now look ahead to US jobless claims data this afternoon. Analysts are expecting jobless claims to continue falling slowly to 1.5 million, down from 1.87 million the previous week. Continuing claims will be closely eyed, as these will provide a clue as to how quickly people are being re-hired as economies reopen. Expectations are for continuing claims to drop to 20 million, down from 21.5 million last week.