The FOMC minutes showed that the FED is not as perturbed by
the trade war as one would have thought in July. The committee members continue
to see the economy as reasonably strong and do not want to go on a rate cut
cycle mainly because they do not want to signal a slowdown fear to the economy.
This should support the dollar as the ECB and BOJ do not have the backing of a
similarly strong economy.
On the other hand Trump seems to be shifting focus away from
China and onto the FED stating that the FEDs policies are the main problem for
the US. The FED is highly unlikely to give in to the President’s pressure and
therefore would continue to act as per incoming data. Meanwhile markets factor
in 100% probability of a rate cut in September.
USDCNH has inched higher than 7.085 from yesterday’s 7.045
while equities in Asia are in the red. The government’s anticipated stimulus
package has not been announced indicating the difficulty in managing fiscal
responsibility and growth under the given circumstances. A weekly close above
71.80 should result in 72.50. Announcement of fiscal stimulus can take USDINR
towars 71.35 (temporarily only). For the day, CMP 71.72, Range 71.60-71.85.
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