Trump apparently asked Comey to stop investigations into Flyn’s ties with Russia and that has created a storm called Memo Gate. Comey testifies in front of the senate on Thursday (18th) in a public judicial hearing. Comey previously had rejected to appear in a closed door hearing on Tuesday. A lot of deal making can happen between today and tomorrow but I would think that Comey could say a few things that could hurt Trump administration. This could lead to charges of obstruction of justice against Trump which was one of the main reasons why impeachment proceedings were started against Nixon in 1974.
Memo Gate is creating a moderate risk off sentiment in the market along with a sharp dollar sell off against G7 specially. Large flows into European equities have happened from the US in the last week (USD 6bn in 2days) and now the falling confidence in Trump administration to execute the tax cuts can drive UST yields lower along with dollar index. I had mentioned at 1.0985 that EURO is likely to head towards 1.15 in the medium term. Politics will again drive markets making data irrelevant for some time.
USDINR made an overnight low of 63.93 before memo gate created a mild EM currency sell off. Markets are talking about large QIP inflows while FPI inflows continue into debt and equities on a consistent basis. With EM currencies slightly negative and memo gate hearing on Thursday RBI might not allow INR to break 63.90 today. An uptick in USDINR on account of memo gate might be a good opportunity to initiate shorts. Technically a break below 63.90 could take the comfort zone away from unhedged participants driving the pair quickly towards 63.60. For the day, CMP 64.03, Range 64.15-63.90.
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