Anticipation Builds as Pakistan Awaits Inflation Data: Implications for the Rupee and Economic Landscape

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Hopes are high among investors and traders that positive inflation figures could spell good news for the Pakistani Rupee, currently trading at approximately 279 PKR per USD.

The economic sphere anticipates the release of pivotal inflation data today, March 1st, 2024, at 10:00 GMT. With the Year-on-Year inflation rate at a staggering 28.3% and the Month-on-Month rate at 1.8% in the previous figures, all await eagerly for the potential impact of this announcement.

January 2024 marked a notable shift in Pakistan’s economic landscape as the annual inflation rate experienced its first decline in three months, easing from 29.7% in December to 28.3%. This moderation in price increases extended across various sectors, including food, restaurants & hotels, transport, recreation & culture, and health, while housing & utilities witnessed a slight acceleration.

Despite this, the Consumer Price Index (CPI) still climbed by 1.8% compared to December, underscoring Pakistan’s persistent double-digit inflation, albeit below the record high of 38% in May 2023. The country continues to grapple with an economic crisis, with support from the IMF since July 2023.

Efforts by the central bank to rein in inflation through record-high interest rates face headwinds from factors like soaring energy prices, currency depreciation, and increased taxes, exerting ongoing pressure on the CPI. In its January 2024 meeting, the central bank revised its inflation forecast for the fiscal year ending in June to 23%-25%, reflecting the challenging economic environment.

From a technical analysis perspective using the Daily chart of USDPKR, it appears that the price has been consolidating within a range bounded by 279.6562 as resistance and 278.9961 as support since February 12, 2024. Currently, the price seems to have encountered rejection at the support level. If this rejection holds firm, indicating strong support, there is a high probability that the price, currently around 271.1419, will continue its upward movement towards the resistance level at 279.6562. However, if the support fails to hold and the price breaks below it, there are increased chances of further downward movement in price.


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