The IMF cut its global growth forecasts by 20 bps to 3.5%
citing trade and Brexit related uncertainties. Given that both US and EU are
moving into headwinds as far as growth is concerned, it is expected that both
ECB and FED will tilt towards the dovish side in their respective rate
outlooks. This should keep EURUSD in a range, which should make a weekly close
before 200 WMA at 1.1325 very unlikely. On the other hand JPY could gain
against the dollar given the relative improvement in Japanese outlook vis-à-vis
the US making USDJPY unsustainable above 110.20 (55WMA) levels. Brexit related
uncertainty could weigh on GBP but GBP gains could be also strong in times of
positive news, making Cable highly unpredictable.
Oil gave up gains on the back of lower growth outlook. 1m
NDF is trading 2p right as compared to 3p right yesterday morning. The fiscal
concern for a populist budget in India ahead of central elections is fully
priced into bonds and currency. Yesterday we saw some amount of positives
getting priced into the fiscal outlook with reports suggesting that the fiscal
dole out would be under Rs. 1 lakh crore only. I would expect yesterday’s high
of 71.50 to be not breached this week while a test of 71 looks likely. For the
day, CMP 71.32, Range 71.40-71.15.
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