Market reports suggesting the FED will hold a press conference after every FOMC indicated that the FED might be turning more hawkish, which in turn gave a mild boost to the dollar. Yesterday US CPI was as per expectations with YOY core at 2.2% while the headline read at 2.8%. Consequently a hawkish FED is priced in already with a 25bps hike. It is only if the FED surprises with incremental steps (like higher dot plots) that we would see a further boost to yields and DXY, otherwise we could see a moderate selloff in USD post the meeting, as the long dollar positions get cut. I would think given the cool off in EU and Japanese growth, the FED would want to wait before it decides to (if at all) increase its tightening pace (either in terms of forward guidance, hikes and balance sheet reduction).
USDINR 1m NDF is trading 5p right while EM currencies (specially the new fragile ones) got sold off since yesterday night. Equity markets continue to look resilient even though FIIs continue to pull out money from India. Oil prices have cooled off since yesterday and international news suggests that talks of production hikes should keep the price below 80 for now. The selloff in Indian bonds and INR seems to have lost momentum for the time being. The broad range I see is 67.85-66.85 which could continue for a few weeks considering that we have seen a trending market in April and May. CMP 67.60, Range 67.65-67.45.
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