- Pakistan Rupee (PKR) drops on a broad risk off mood in the market which supports the safe haven US Dollar (USD)
- Pakistan current account deficit narrows
- Hopes of US stimulus fade, dragging risk sentiment lower
- US existing home sales expected to jump 24.5% in June
The US Dollar Pakistani Rupee exchange rate (USD/PKR) is on the rise for a third straight session on Wednesday. The pair settled on Tuesday +0.35% at 168.12. At 09:15 UTC, USD/PKR trades +0.1% as 168.25 after easing back from the all time high of 168.70.
The Pakistan current account deficit narrowed by more than forecast across the previous fiscal year ending 30th June. The government’s higher expenditure and lower income narrowed by 78% to $2.96 billion. The current account deficit shrank to 1.1% of GDP in fiscal year 2020, compared to 4.8% in fiscal year 2019.
The deficit of $2.96 billion is the smallest record in 5 years, however it was achieved through slowing imports rather than growing exports. However, growth in receipt of workers remittance has also helped to narrow the deficit.
Economic growth is expected to improve in fiscal year 2021, with the International Monetary Fund recording 1% growth.
The US Dollar is trading higher versus its major peers as risk sentiment sours. After the EU announced a €750 billion stimulus package yesterday today the focus has moved to the US. The Republicans and Democrats are struggling to agree on the next round of fiscal stimulus. Whilst the Republicans are proposing $1 trillion package, the Democrats are backing a $3 trillion deal.
Optimism is fading that he two sides will agree a rescue package this week. As a result, risk sentiment has skidded lower across the board.
Looking ahead, US existing home sales data will move into focus. Analysts are expecting existing home sales to recover after falling to the lowest level since the collapse of the housing market 10 years ago. Expectations are for a 24.5% jump in June to a 4.8 million annual rate. A strong reading could help lift the downbeat tone in the market.