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The upcoming week promises significant developments for Pakistan, particularly concerning the Pakistani Rupee (PKR) and the gold markets. The State Bank of Pakistan (SBP) is poised to make a critical interest rate announcement on Monday, setting the stage for the federal budget presentation for 2024-25 on Wednesday.

A Sources mentioned in last night that the rupee could potentially strengthen to a range of 260-270 as the demand for dollars declines, following the departure of the majority of Pakistani pilgrims to Saudi Arabia for this year’s Hajj. However, this optimistic scenario depends on several factors: a staff-level agreement on a new loan program from the International Monetary Fund (IMF), a reduction in the policy rate by the SBP, and a budget that favors the public.

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The conjunction of the SBP’s Monetary Policy announcement, the budget presentation, and the ongoing IMF negotiations is crucial. The PKR is expected to appreciate if the authorities prioritize public support over austerity measures. While achieving a rate of 260-270 is possible, it is more likely that the PKR will remain close to its current level of 278 per dollar.

Despite recent strong inflation data suggesting the possibility of a significant rate cut in tomorrow’s announcement, an unexpected outcome could still occur.

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