Comey’s written testimony which was published yesterday was
less concerning and resulted in a mild uptick in yields and dollar. His live
testimony and Q&A is today and could lead to mild volatility only, as his
written submission does not seem to contain anything that can become
discontinuous for the President. Oil inventories in the US resulted in a 4%
fall in Brent. Brent has not been able to sustain above 50 levels which is
negative for the entire reflation trade and this could be a factor which
prevents ECB from speaking hawkish today and toe a wait and watch line.
The other big event is the UK elections where results will
start becoming clear early morning tomorrow. The polls suggest a close 45% to
35% kind of a race and therefore ruling out a surprise might not be prudent.
Even if May wins but gets lesser seats than envisaged, it might be GBP
negative. Considering the fact that GBP rallied on the announcement of
elections expecting May to win, short GBP trade (above 1.3050) looks better
from a risk reward perspective.
USDINR 1m NDF is trading 7p left showing offshore selling
pressure which could be because of higher debt inflows post policy yesterday.
Rs. 3000 crores were invested in debt yesterday and mostly after the policy,
which shows that RBI bought USDINR aggressively at 64.30 levels. We have seen
large commodity buyers (gold and oil) actively bidding today morning. I would
expect INR appreciation to be limited to 64.30 for today while market could buy
the pair before day end going into major events overnight. CMP 64.38, Range
64.30-64.55.
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