INR update: Neutral risk sentiments and inflows to keep Rupee in range

The outlook on US China trade deal remains positive although the timing remains uncertain with White house indicating that significant work is still pending. This week IMF will revise its global growth outlook (likely lower) while US CPI on Wednesday might give more clarity to rate cut expectations in the US in 2019.  ECB policy on Wednesday would be critical and EURO might break the 1.1174-1.12 support zone ahead of the meeting itself. May accepted that a positive vote from the parliament on a Brexit deal might be difficult to achieve in the near future. Given the confusion around Brexit related politics in the UK, the lack of consensus and delay might ensure that UK ends up staying in the EU.

Brent oil has moved higher on the back of ongoing production cuts plus military clashes in Libya. This makes it seem that the break of 70 in Brent is idiosyncratic and therefore does not suggest an immediate risk to INR. USDINR 1m NDF is trading 7p right while near terms forwards are trading at normal levels in the onshore market. There are a few bond and stake sale related inflows in pipeline which should keep USDINR well offered. A daily close above 69.55 levels should take the pair towards 69.85 levels this week (unlikely though). I would expect USDINR to trade in the range of 69.50-68.50 for most of April. CMP 69.49, Range 69.55-69.30.