The world now realizes that Trump intends to deliver on his trade sanction promises and we can soon see China also rattling its sabre with more than just counter tariffs. In this environment risk assets are unlikely to continue their dream run. Euro should have limited upside for now and tomorrow after Sintra conference (where Draghi, Powell and Koruda speak) we can see EURUSD breaking 1.1550 and heading lower. First target remains 1.1451. USDJPY should also remain capped around 110.20-110.50 levels with yields falling and risk not supporting. A good dollar neutral trade could be short EURJPY at 128 levels.
USDINR 1m NDF is trading at 35p from yesterdays 30p which is 11p right as compared to onshore. EM currencies are largely flat except for ZAR, since yesterday. Equities in Asia look under moderate selling pressure given the trade tensions. FIIs have now withdrawn more than $5b this year from Indian debt and this can accelerate because of INR depreciation. Since morning foreign banks have been on bids along with commodity importers. Medium term range remains 67.80-68.50. CMP 68.10, Range 68.00-68.25
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