Bank of England to say UK recovery is accelerating
|US April ADP and ISM non-manufacturing PMI came in below expectations. If US data misses expectations, it would make it difficult for the market to position itself against the Fed. US yields have come off 1-2bps while US inflation expectations have risen further, pushing short-term real rates further lower. This is weighing on the Dollar. The Dow saw modest gains to end at a new record high. The focus will be on the BoE monetary policy and Scottish elections today. US weekly jobless claims also due today.
The RBI yesterday announced a slew of measures to support the economy through the second wave. It announced measures to incentivize bank lending for COVID-related purposes. It also announced liquidity measures for Small Finance Banks and introduced resolution framework 2.0 for stressed assets. The measures announced by the central bank brought cheer to the markets, especially banking stocks.
The RBI announced the purchase of Rs 35000 CRS of securities under GSAP on 20th May. The bond market rallied with a yield of 10y coming off 3bps to 5.98%. We have the Rs 10000crs special OMO too. Forwards cooled off yesterday with cash Tom coming off. The spot attempted to break 74 but kept getting sold off there.
Strategy: Exporters are advised to cover a part of their near-term exposure on upticks towards 74.80-75.00. Importers are advised to cover through forwards on dips towards 73.80. The 3M range for USDINR is 73.50 – 76.00 and the 6M range is 73.00 – 76.50.
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