News of political concerns in Germany abating drove Euro higher and Tech stocks in the US helped risk sentiments in the NY session. Equity markets seem to be holding on (except in China) in spite of the trade concerns. Rumors suggested that Trump is preparing to pull out of WTO. This US administration seems to be delivering on all its promises so that might be the next step in the ongoing trade war and an announcement to that effect can happen as early as 4th July. US growth continues to be robust as reflected by the manufacturing ISM while Euro zone PMI continues to fall (although still at a healthy level of 55). Today EU retail sales will be important to ascertain if the slowness in economic activity in EU has extended into the summer as well.
CNH continues to be focus and with Hang Seng and Shanghai stock exchanges falling, it will be prudent to expect a fall in risk assets all across as we approach the trade tariff deadline of 6th July. A weekly close in CNH above 6.7 would perhaps open the door for a round 7. USDINR 1m NDF is trading at 35p as compared to 27p on shore, this indicates similar buying pressure like yesterday. EM currencies continue to gradually depreciate. Asian equities are flat except for Chinese equities which continue to register big losses. India 10Y bonds are stable at 7.89% and INR does not seem to creating a panic in bond or equities. This would mean that RBI would not be too worried with 69 plus levels. Specially after Mr. Goyal asserted that depreciation in INR is because of exogenous factors. The view remains of 70 in July. CMP 68.89, Range 68.80-69.20.
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