IMF trims view on growth rebound as ‘dangerous divergence’ see

Abhishek Goenka IFA Global

Global developments

US long-term yields have retreated about 4-6bps, resulting in the yield curve flattening. The rally in crude prices seems to be taking a breather. Natural gas prices too have cooled off and this has brought some relief to bond markets. The US Dollar has weakened overnight. The Euro has bounced off the lowest levels seen yesterday since July'2020. The Pound continues to trade a 1.3550-1.3650 range.

US job openings fell for the first time since last year. Today the focus will be on the US CPI print (exp 0.3% MoM and 5.3% YoY) and minutes of the latest Fed meeting.

Domestic developments

September CPI print came in lower than expected at 4.35% against the expected 4.50% mainly on lower food prices. Core inflation however stays elevated at 5.99%. August IIP print came in better than expected at 11.9%. The IMF lowered the global growth forecast a tad bit kept India's FY22 growth forecast unchanged at 9.5%

Equities

The Nifty ended 0.25% higher yesterday at 17991. Asian equities are trading with a positive bias despite a weak close on Wall Street.

Bonds

The pressure on bonds and Rates eased yesterday. The yield on the benchmark 10y retreated 2bps to 6.33%. 3y and 5y OIS too cooled off about 5bps to end at 4.96% and 5.51% respectively. Lower than expected CPI print, a drop in US treasury yields and a halt in crude price rally may further boost sentiment in the bond market today.

USD/INR

We saw exaggerated two-way price action in USD/INR yesterday. The Rupee had recovered to 75.17 initially but sold off thereafter to 75.67. Likely intervention by the central bank helped the Rupee close at 75.51. Asian currencies are stronger against the USD. 3m Atmf vols ended at 5.01% while 1y forward yield ended at 4.43% yesterday.

Strategy: Exporters are advised to cover at the current level. Importers are advised to cover on dips towards 74.50 The 3M range for USDINR is 73.80 – 76.00 and the 6M range is 73.50 – 76.50.

Download The Full Daily Currency Insight

Author

Abhishek Goenka

IFA Global

Mr. Abhishek Goenka is the Founder and CEO of IFA Global. He pilots the IFA Global strategic direction with a focus on relentlessly improving the existing offerings while constantly searching for the next generation of business excellence.

EUR/USD climbs to daily highs on US CPI

EUR/USD now accelerates it rebound and flirts with the 1.1880 zone on Friday, or daily highs, all in response to renewed selling pressure on the US Dollar. In the meantime, US inflation figures showed the headline CPI rose less than expected in January, removing some tailwinds from the Greenback’s momentum.

GBP/USD clings to gains above 1.3600

GBP/USD reverses three consecutive daily pullbacks on Friday, hovering around the low-1.3600s on the back of the vacillating performance of the Greenback in the wake of the release of US CPI prints in January. Earlier in the day, the BoE’s Pill suggested that UK inflation could settle around 2.5%, above the bank’s goal.

Gold: Upside remains capped by $5,000

Gold is reclaiming part of the ground lost on Wednesday’s marked retracement, as bargain-hunters seem to have stepped in. The precious metal’s upside, however, appears limited amid the slightly better tone in the US Dollar after US inflation data saw the CPI rise less than estimated at the beginning of the year.