German IFO data continued to paint a gloomier picture for
the EU which along with BOC’s dovish outlook led to dollar strength. If at all
anything then the BOJ also tilted towards an aggressive monetary easing stance
although there were no surprises there. A weekly close on EURUSD below 1.1150
should call for 1.10 and lower. The recent downward momentum in EURUSD points
to a higher possibility of the pair finally breaking out of the range this
week. The first estimate of US GDP growth in March quarter is expected to be at
2.2% while the current quarters expectations are at 2.8%. This reflects the
growing contrast between the US and other DMs which should continue to boost
the USD.
USDINR 1m NDF is trading 7.5p right while EM currencies have
depreciated overnight on the back of dollar strength and higher oil prices. The
inflows in USDINR seems to have been largely done. The only expected inflow in
the next week could be the ongoing rights issue of a telecom operator which
also according to some chatter has been completed. Other inflows seem to have
been completed or have been delayed due to various reasons. Given this backdrop
of reduced inflow expectation, higher oil prices and a breakout in range for
USDINR, the pair seems to be headed to 70.35-70.50 next week. CMP 70.02, range
69.95-70.25.
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