Tariffs, Currencies and Misjudgements

The Saddam Miscalculation – Underestimating the Man Behind the Office
Back in August 1990, Saddam Hussain rolled his tanks into Kuwait, convinced the United States would see it as someone else’s problem. He figured President George Bush wouldn’t risk American lives over it. He misread the man — and it was a poor decision. Bush took it as a direct challenge to U.S. resolve, and within months, the Gulf War was underway.

This week’s flare-up between Washington and New Delhi has similar DNA. Modi’s India publicly denied U.S. involvement in brokering the India–Pakistan ceasefire. At home, it might have played well. Modi may have believed denying U.S. credit was a safe domestic political move, but it fed into Trump’s personal narrative of being disrespected — prompting a very public, policy-level retaliation.

The tariffs are both an economic lever and a bout of political vendetta, targeting India for its Russian oil imports and BRICS alignment, while at the same time exerting pressure on Russia over Ukraine talks and prying open U.S. exports to India.

Economic Fallout for India
This has resulted in cancelled orders for Indian exporters and the prospect of a significant FDI outflow. Expect the INR to wobble and businesses to feel the squeeze as some supply chains drift toward Vietnam, Bangladesh, and Mexico — all with the ever-present chance of Trump reversing course overnight.

PKR Outlook
The Rupee’s strengthening streak continues, though the pace has clearly slowed. A breach of the 282/$ level would push it into an uncomfortable zone, particularly as regional currencies are allowing mild devaluations to cushion the tariff hit, and with the INR near its lifetime low.

In the open market, liquidity remains tight; however, interbank conditions have improved — NOPs are healthier and import payments are being cleared on time, helped by the SBP’s recent hike in FEEL limits for commercial banks.

Following the SBP meeting, the dual remittance rate has also aligned to more manageable levels. Overall sentiment is stable, but exporters remain cautious — holding off on forward sales for now.

Global Markets
– Fed Hawkishness Delays Cuts: Powell’s hawkish post-FOMC tone, despite weak jobs and PMI data, has pushed back rate cut expectations.
– Fiscal Policy Overshadows Central Banks: U.S. tariffs and Europe’s big spending moves are steering markets more than Fed or ECB signals.
– Political Drama Shakes Confidence: Trump’s “rigged” jobs claim and firing of the BLS chief rattled trust in U.S. data, raising dollar debasement fears.
– Gold Back in Focus: Echoes of the 1970s debt-to-gold surge suggest gold could gain if policy credibility slips further.

Projections
• 1 Week: 282.00
• 1 Month: 282.50
• 1 Quarter: 284.00
EUR/USD
• 1 Week: 1.1613 (Bearish)
• 1 Month: 1.1639 (Sideways)
• 1 Quarter: 1.1782 (Sideways)
GBP/USD
• 1 Week: 1.3423 (Sideways)
• 1 Month: 1.3583 (Sideways)
• 1 Quarter: 1.3743 (Bullish)
USD/JPY
• 1 Week: 147.5 (Bearish)
• 1 Month: 145.36 (Bearish)
• 1 Quarter: 143.37 (Bearish)
Oil WTI
• 1 Week: 63.83 (Sideways)
• 1 Month: 66.58 (Bullish)
• 1 Quarter: 65.29 (Bullish)
Gold
• 1 Week: 3410 (Bullish)
• 1 Month: 3467.5 (Bullish)
• 1 Quarter: 3473.33 (Bullish)