INR update: Markets remain tensed as it awaits an Iranian response

Considering the fact that it seems certain that the Senate will keep Trump in office when the impeachment trial begins in the second week of January; it is difficult to link the impeachment trial to the US decision of escalating tensions with Iran. But what is unnerving is a President facing impeachment and having to decide on possible military actions in case Iran decides to retaliate. This week global markets would stay anxious while a few days without escalation would make markets look ahead.

US ISM (manufacturing PMI) had continuously slipped in 2019 and Friday’s reading below all estimates at 47.2 was the 5^th reading below 50 indicating a shrinking growth differential between the US and other DM economies. The US ISM prints also indicate that the next rate move from the FED would be a rate cut.

USDINR stays on the edge and reacted on the Iran geo political tension as oil prices have spiked to 70.44. The next resistance for USDINR is in the zone of 72.25-72.44. While escalation of geo political risks can happen instantly, de-escalation would only take effect gradually; Therefore, this week needs to pass before one sets a direction for USDINR. For the day CMP 72.01, Range 71.95-72.25.