Dovish comments from the ECB pushed the Euro lower while
news headlines that Xi and Trump might meet at the G20 raised the possibility
of a solution to the trade dispute. Both these news have led to a temporary and
moderate improvement in an otherwise muted risk environment in global markets.
Today we have the FOMC where the FED has enough reasons to be dovish (slowing
US growth and trade war concerns) but since its accommodative stance is priced
in, the FED might want to check such expectations and might deliver a mild
surprise, by being less dovish than the conditions warrant. This can lead to
the dollar index rising towards 98 levels by tomorrow (CMP 97.6).
USDINR has been kept in range by nationalized bank action on
both sides. Rising chatter about the RBI using some of its capital to exhaust
government debt (in some form or the other) should result in India bond yields
going lower which could attract debt inflows. The pair should continue to trade
in 69.30-69.90 range for some time unless USDCNH breaks out either side (most
likely lower). For the day CMP 69.65, Range 69.50-69.75.
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