• Pakistan’s Budget comes into effect at the start of next month
  • The Budget has drawn fierce criticism with servicing debt and defence the largest expenses
  • US Jobless claims are expected to show a slow improvement in the US labour market
  • US Dollar Pakistani Rupee exchange rate (USD/PKR) rises to test resistance at 166.00

The Pakistani Rupee is extending losses for a third consecutive day on Thursday, hitting a 2-month low at 166.00.

At 09:15 UTC, USD/PKR is trading + 0.2% at 166.00. This is at the top end of the daily traded range as risk sentiment remains weak and ahead of US jobless claims data.

The Pakistan Rupee continues its downward trend as attention turn to Imran Khan’s Budget for fiscal year 2020 – 21. The government has unveiled its ambitious federal budget which will begin on July 1st.

The budget sees most spending go to servicing debt (40%) and defence (18%, up from 12%). Interestingly it also forecasts GDP growth projected at 2.1% growth, despite many saying the coronavirus crisis will fuel a major recession.  A deficit of just 7% of GDP is being forecast, down from 9.4% and no new taxes have been levied. The budget is attracting its fair share of criticism from opposition parties.

Analysts are expecting US jobless claims to increase by 1.3 million, down from last weeks 1.5 million. This will be the lowest level of Americans seeking unemployment benefits in 3 months since the coronavirus crisis started. However, it will also be six times the level of initial jobless claims in February, pre-pandemic.

Continuing claims track the level of Americans being hired. As more Americans are hired, the number of continuing claims fall. Continuing claims are expected to decline to 19.8 million, down from 20.9 million last week. Whilst this is a step in the right direction, it is a frustratingly slow pace of re-hiring which dampens hopes of a quick economic recovery.

A better than forecast jobless claims report could see the US Dollar decline as risk sentiment improves. However, a worse than expected report could see risk appetite drop, boosting the safe haven US Dollar.

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