EU data surprise had gone into negative territory since March 2018 beginning and is now showing some signs of bottoming out. In the last 2 years whenever EU data has improved EURUSD has made new highs. This would make the EU HICP, Unemployment, PMI and Retail sales data release this week important, even though individually these prints seem to make little impact as compared to an NFP, US GDP or US ISM (services ISM comes out today). In the shorter term though the market continues to cherry pick on tweets and articles in US media, speculating about what Trump is thinking about today. Trump’s modus operandi seems to be to first scare and then negotiate a deal through talks (North Korea is a good example) which is what he could be looking at with China.
USDINR 1m NDF is trading 2-3 p left which indicates mild offshore selling. EM currencies are trading mixed since yesterday with Asian equities in moderate positive territory, tracking the overnight gains in the Dow. Before the RBI policy tomorrow, INR can remain stronger on expectations of a FII limit increase in bonds. Also the fact that most participants are sitting square or long would help INR appreciation to 64.85-64.70 by EOD tomorrow, which would be a good level for importers to hedge their exposures till July maturity. CMP 64.93, Range 64.85 to 65.00.
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