Retail sales and CPI showed, that the much needed data support for the FED’s balance sheet reduction plan is going to take time. Consequently GDP tracking for Q2 US growth was revised lower but US yields were not able to sustain lower and starting inching up later in the US session. This shows that the market still goes by the FED’s word rather than inflation reality, next week’s FOMC would give us more insights. JPY and GBP were the main beneficiaries of the resulting USD weakness.
USDINR 1m NDF is trading 7p left which is the most that I have seen in a while, indicating the return of offshore sellers. Equity market inflows have picked up moderately as participants expect NIFTY to break 10k levels now. EM currency appreciation since Friday seems to indicate that INR could be at 64.20 levels subject RBI intervention. Trade data on Friday was mildly INR positive as I was expecting further deteriorating in the trade deficit which did not happen. I would carry overnight shorts as not much is expected during the US session. CMP 64.35, Range 64.42-64.25.
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