US services ISM of 55+ and manufacturing ISM of 51+,
notwithstanding the US GDP is coming off (latest forecast of 1.3% growth for
the current quarter). The turning economic cycle plus headwinds from the trade
war will ensure that the FED continues its rate cut rhetoric. Currently market
is unanimous in its expectation of a rate cut in July and September. The 3rd
rate cut by Dec 2019 is highly likely with a 45%
chance in market pricing.
Today Powell testifies in front of the congress at 7-30PM
IST where it is highly unlikely that he would take the July and September rate
cuts off the table. At the same time he doesn’t gain much by increasing the
chances for a third rate cut so much in advance. Therefore he might be less
dovish resulting in a mild and temporary uptick in yields and therefore the
dollar.
USDINR continues to be driven by nationalized banks action
on both sides. Price action continues to show dominance of selling pressure on the
pair. The larger view remains of USDINR heading to 67 by September end. For the
week the range should be 68.85-68.30. For the day CMP 68.58, Range 68.68-68.45.
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