Saudi Arabia and Russia agreed on the sidelines of G20
before the OPEC+ meet today, to continue the production cuts in order to keep a
lid on the abundant supplies. The timing of the announcement (i.e., along with
G20) seems to suggest that the US is also in agreement to this and therefore
the view that oil prices should not go above 70 continues to hold (given
Trump’s open criticism for higher oil prices). US economic surprise index has
dipped significantly in June taking with it the GDP forecast to 1.5% for June
quarter. This developing reality of a slowing US should continue to get priced
in US yields and therefore the dollar.
The US-China announcement was in line with market
expectations although concession to Chinese firm Huawei are being dubbed as a
significant positive development.
Higher oil prices, nationalized bank’s buying of USDINR and
68.80 support should prevent further and immediate INR appreciation. As I had
expected last Monday USDINR has trended lower breaking the 69.30-69.80 range
but further appreciation would happen only because of CNH or growth positive
developments locally. US-China trade dispute should drag on so I would not
expect much from CNH in the near term. Locally one can expect a breather to the
liquidity issues of NBFCs and with budget on this Friday there are
possibilities of certain pro growth announcements as well. For the week we
should see 69.20 before USIDNR breaks 68.80 convincingly, medium term target is
68.30. For the day, CMP 68.90, Range 69.05-68.75.
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