In the US retail sales painted a rosy picture while the tax bill faces some uncertainty. BOE and ECB were as expected. ECB has continued to be slightly dovish indicating that there will be no rate hikes until 2019 perhaps. BOE does indicate that a couple of rate hikes are coming in 2018. For now the setup for GBPUSD looks more bullish than EURUSD.
Exit polls suggested that BJP would garner 110-135 seats in Gujarat along with a substantial majority in Himachal. Basis recent exit polls experience in India, I would think that the actual results on Monday would be closer to the polls. On actual results we should see further gains in equities and gains in INR, i.e., on Monday.
USDINR 1m NDF is trading 1p left only. EM currencies are flat since yesterday so INR can completely focus on the domestic story. Nifty is up 1.1% while INR appreciation has been limited to 20p by nationalized banks. Nationalized banks would not buy USDINR significantly to depreciate the INR on the back of government’s victory as that sends the wrong message. More participants in the market are convinced that 64.10 would not break, which would make me think that the market is not overtly short here and therefore there is further room for INR to appreciate. 30mins trade bellow 64.10 can show us 63.90 and I would expect. CMP 64.15, Range 63.90-64.20. Next week we can see the familiar 63.55 (if exit polls don’t go wrong) but not much lower from there.
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