The dots for FED rates for 2018 and 2019 would be critical along with the inflation forecasts, in the FOMC. A higher fed rate forecast could lead to flattening of the 10-2 US treasury spread leading to equity losses and dollar weakness. On the other hand if the outlook on the economy and inflation is more positive leading to US10Y yields rising, then we can see dollar strength and gains in equities. After the FOMC and press conference if EURO continues to trade above 1.2264 then it can be headed towards 1.245+ levels again.
The Dow recovered yesterday in spite of negativity surrounding Tech companies. Asian equities are in the green while Asian currencies are trading flat ahead of the FOMC. USDINR 1m NDF continues to show mild buying pressure on the pair. Although fundamentals locally look negative for INR, an immediate run up above 65.35 looks unlikely on the charts. The pair should trade in a tight range ahead of the FOMC today. CMP 65.21, Range 65.15-65.30.
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