Trump regained some political mileage yesterday while
European markets are buoyant on a likely Macron win. On the other hand we are
seeing a rout in commodities markets driving Chinese stock exchanges lower. Oil
prices which started falling over supply glut news have now started falling on
demand concerns arising from China. The positives (of France and US) seems to
be factored in and another risk on move can be seen on Monday immediately post
Macron win. What could last in the medium term now is the commodities fall
which will start weighing on global inflation outlook too driving yields lower.
Thus any uptick in risk assets over the next 2 sessions can be used to sell for
a risk off market move over the next 2 weeks. My favourite would be USDJPY
which has got resisted at 113 levels and an uptick to 112.50 and 113 can be
sold again.
Today we have the US NFP where I would expect the data to
come in weaker. This is basis the employment component in services ISM which
came in weaker day before yesterday (at 51.4). Earlier we had seen personal
income coming in weaker which could indicate the average hourly earnings are
unlikely to surprise on the higher side.
USDINR 1m NDF is trading 5.5p left as compared to 7p left
yesterday. EM currencies have depreciated slightly with commodity led EM
currencies registering significant falls. Chinese and Hong Kong equity markets
are looking weaker on the back of commodity fall or vice versa, but irrespective
are adversely affecting risk sentiments. FPIs have been continuously taking out
INR 5-6bn out of equity markets while similar amounts have been seen coming
into debt markets. Any dip to 64.20 levels could be bought for the next 1-2
weeks where USDINR can head towards 64.50-64.70 levels. For the day CMP 64.27,
Range 64.20-64.40.
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