IMF cuts India’s growth forecast to 8.2% for FY23
|USDINR 76.35 ▼ 0.15%.
EUR/USD 1.0818 ▲ 0.30%.
GBP/USD 1.3041 ▲ 0.35%.
India 10-Year Bond Yield 7.154 ▲ 0.04%.
US 10-Year Bond Yield 2.938 ▲ 0.80%.
ADXY 106.28 ▲ 0.04%.
Brent Oil 108.22 ▲ 0.90%.
Gold 1,945.60 ▼ 0.68%.
NIFTY 5017,080.70 ▲ 0.72%.
Global developments
A triple whammy of Fed tightening, China lockdowns and the Russia-Ukraine war is hurting global risk sentiment and is driving the flight to safety.
Chinese banks kept the loan prime rate unchanged, defying expectations of a cut given slowing growth due to ongoing lockdowns.
Price action across assets
US yields are higher by 15bps across the curve with 30y yield breaching the 3% mark. Higher US yields are driving Dollar strength. USD/JPY continues its uptrend, breaching the 129 mark. Euro and Pound too have been under pressure though we are seeing a bit of an uptick in the Asia session. Crude prices are lower on concerns of a global growth slowdown. Brent has retreated to USD 107.5 per barrel from around USD 112 per barrel yesterday. US equities ended higher yesterday with S&P gaining 1.6%. While Shanghai and HangSeng are trading lower, the rest of Asian equities are trading with modest gains.
China unexpectedly keeps lending benchmark unchanged.
Domestic developments
USD/INR
The Rupee sold off towards the end of the session, tracking the sharp selloff in equities to end at 76.50.
The rupee is likely to open flat around 76.50 and trade in a 76.35-76.70 range intraday with a weakening bias.
1y forward yield ended 6bps lower at 4.02% while 3m ATMF volatility was steady at 5.54%.
Bonds and rates
Domestic bonds were steady yesterday with the yield on the 10y benchmark ending almost flat at 7.15%. 3y and 5y too ended flat at 6.13% and 6.63% respectively.
Equities
The Nifty fell for the fifth straight session, dropping 1.25% to close below the 17000 mark. There was a sharp sell-off towards the end of the trading session. SGX js indicating an open around 17000 for the Nifty.
Strategy
Exporters are advised to cover on upticks towards 76.10. Importers are suggested to cover on dips towards 75.30. The 3M range for USDINR is 74.00–77.00 and the 6M range is 73.80–77.30.
Russia's war in Ukraine to blame for rising global food insecurity – Yellen.
FX outlook of the day
USD/INR (Spot: 76.34)
US yields are higher by 15bps across the curve with 30y yield breaching the 3% mark. Higher US yields are driving Dollar strength. The Indian rupee is expected to remain under pressure due to a firm dollar, surging US yields, and the escalating situation between Russia-Ukraine. The pair is expected to trade with a neutral to bullish bias ahead of Fed Chair Powell's speech due tomorrow. The intraday range for the pair is expected to be 76.20-76.70.
EUR/USD (Spot: 1.0817)
The EURUSD pair regains some composure and revisits 1.0800 following last week’s new 2022 lows in the mid-1.0700s following the ECB’s dovish tone. Despite the ongoing bounce, the overall outlook for the pair remains well on the bearish side for the time being, in response to dollar dynamics and geopolitical concerns. The pair is expected to trade with a sideways bias ahead of ECB President Lagarde's Speech due tomorrow. The intraday range for the pair is expected to be 1.0780-1.0860.
GBP/USD (Spot: 1.3042)
The GBPUSD pair is scaling higher after sensing significant bids to near the psychological support of 1.3000. The cable has been strengthened amid weakness in the US dollar index. Also, investors have poured liquidity into the cable as the market participants are awaiting the speech from the Bank of England’s Governor Andrew Bailey, which is due tomorrow. Investors are expecting a tad more hawkish guidance from BOE’s Bailey as higher inflation in the UK’s zone may compel a fourth consecutive rate hike by the BOE in May. The pair is expected to trade with a sideways bias. The intraday range for the pair is expected to be 1.3000-1.3080.
USD/JPY (Spot: 128.15)
The USDJPY pair extends to 20-year highs and eyes to reach the 130.00 mark, amidst a mixed session, with global equities fluctuating, bond yields rising, and commodities down. Aside from this, the USDJPY is underpinned by US Treasury yields. Also, the central bank divergence between the ultra-loose accommodative policy of the Bank of Japan, contrarily to the Fed, weakens the JPY. Efforts of verbal intervention by the Minister of Finance Suzuki and BoJ Governor Kuroda were mainly ignored by market players. The pair is expected to trade with a neutral to bullish bias. The intraday range for the pair is expected to be 127.80-128.50.
Japan posts trade gap far wider than forecasts as China exports slow, energy imports soar.
Economic calendar
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