INR update: G20, Opec meet, budget to drive USDINR in the near term

Trump had announced the US-Mexico-Canada trade deal on October 1^st 2018 just before the November 2018 midterm elections. Therefore there might not be any political upside for Trump to resolve the China trade dispute in a hurry and consequently I would not expect any big positive outcomes from the G20 meet. The marginally positive developments could be a hold on tariff (already priced in) plus a confirmation that talks between US and China would begin again to finalized the agreement. The US-China trade deal would likely drag on for another 6-12 months and could eventually bring in the EU as well into the controversy, as without a big bang deal Trump would not be able to get the eyeballs he needs to win the November 2020 reelection.

Meanwhile the local markets for the next week should remain focused on the 5^th July budget which should likely bring in some growth supportive measures. The Opec and Opec+ meets on 1^st and 2^nd July should only result in a softer oil price as that’s what Mr. Trump wants and currently it seems that Saudi Arabia is completely in agreement with the Trump administration (after Iran sanctions). On the other hand anecdotal evidence suggests a few capital account inflows could be in pipeline locally which could keep USDINR well offered. Overall the range of 69.30-69.80 has shifted lower to 69.10-69.60 this week. I would expect this range also to break on the lower side as INR catches up with other asset classes / factors. CMP 69.29, range 69.40-69.10.