One would think that the President’s signature on the Hong Kong bill would not bode well for a US-China agreement on the Phase 1 of a trade deal before 15th Dec 2019. But the fact that the USDCNY fix has come in lower at 7.0271 vs yesterday’s 7.0349 indicates that the development is unlikely to affect the trade deal, the same is also indicated by a reasonably stable USDCNH today. Equity markets continue to price the phase 1 to be signed by December 15th.
US growth continues to surprise with the Q3 GDP getting upwardly revised to 2.1%. This along with other indicators makes it certain that the FED is likely to stay on hold for the next 3 months at least. A monthly closing above 98.9 on the dollar index would be a breakout (and therefore unlikely) and significantly bullish.
USDINR 1m NDF is trading flat as compared to yesterday 3p left which indicates reduced selling pressure. EM currencies have moderately depreciated since yesterday evening as risk appetite looks subdued as compared to yesterday. We have seen buying from Nationalized banks since morning. Inflows have been driving USDINR since the last 1 week, and today morning they seem to be missing. For the day, CMP 71.46, Range 71.60-71.30. A couple of hours of trading below 71.30 would indicate that 71 figure is on the cards. A closing above 71.55 would bring in the range of 71.-40-71.70 again. Preferred view is 71.30 and below.
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