TODAY: FRIDAY, 10^th May, 2024

USD/INR:

INR likely to open around 83.45/50

Dollar is trading subdued after overnight after higher than expected jobless claims provided cues that the US labor market is softening. Dollar Index is at 105.30, with EUR at 1.0775, GBP at 1.2515 and JPY at 155.70. US 10y yield is down 5 bp, trading at 4.45%. US yields remain buoyant and yesterday another 0.8% jump in the DOW, though the tech basket rose more modestly. Indian indices saw deep cuts yesterday. Nifty fell 1.5% and broader market indices also cracked 1.7%+. 

The deepening correction in Indian equities is a sign that markets are genuinely concerned about election results. With each phase, uneasiness about the low voter turnout is translating to sharp risk aversion in markets. Given the fact that the Congress manifesto mentions wealth survey and potential moves towards some sort of redistribution, the reaction in markets to a BJP loss/hung parliament could be significant.

Until the elections, it is likely that the Rupee will continue to be pressured by waning risk appetite, irrespective of the global developments. Next week’s CPI is important for the global Dollar, given the recent softness in jobs data. Signs that inflation is easing again towards the Fed’s target will augur well for the Risk assets, but the Rupee will feel the weight of elections more for the time being.

MAJOR WORLD CURRENCIES:

USD:

GBP:

Following BOE-inspired slump on Thursday, the British Pound changed course and trades around 1.2530. Better-than-anticipated UK GDP and a weaker USD behind the advance.

However, the Pound Sterling (GBP) encountered challenges following the Bank of England’s (BoE) decision to maintain the interest rate at 5.25% on Thursday. Reuters reported that BoE Governor Andrew Bailey mentioned during the post-decision press conference that "a rate cut next month was a possibility," but he intends to wait for inflation, activity, and labor market data before deciding. This has raised the prospect of future rate cuts, putting pressure on the British Pound and weakening the GBP/USD pair.

Subsequently, the US Bureau of Labor Statistics (BLS) released data indicating that the number of individuals filing for unemployment benefits surpassed expectations. Initial Jobless Claims for the week ending May 3 rose to 231,000, exceeding estimates of 210,000 and showing an increase from the previous week's reading of 209,000. This suggests a potential shift toward a less hawkish policy outlook by the Federal Reserve (Fed), resulting in pressure on US Treasury yields and undermining the US Dollar (USD).

On Friday, the preliminary Michigan Consumer Sentiment Index is forecasted to show a slight decrease in May. This index is a survey that evaluates sentiment among US consumers, encompassing three primary areas: personal finances, business conditions, and buying conditions.

EUR:

EUR/USD extends its losses for the second successive session, trading around 1.0750 during the Asian session on Wednesday. The US Dollar (USD) gains ground due to the expectations of the Federal Reserve’s (Fed) prolonging higher interest rates. However, the softer US labor data from the last week has reignited hopes for potential interest rate cuts by the Federal Reserve (Fed) in 2024.

On Tuesday, hawkish comments from Minneapolis Fed President Neel Kashkari have bolstered the US Dollar, consequently weakening the EUR/USD pair. Kashkari said that the most probable scenario is for rates to remain unchanged for an extended period. However, if disinflation returns or a significant weakening in the job market occurs, rate cuts could be considered.

In the Eurozone, Retail Sales (MoM) surged by 0.8% in March, rebounding from the upwardly revised 0.3% decline in February. This exceeded the expected increase of 0.6%. It marked the most significant increase in retail activity since September 2022, indicating strength in the European consumer sector. Additionally, Retail Sales (YoY) increased by 0.7% compared to the revised 0.5% drop in February. This indicates the first growth in retail since September 2022, signaling a positive shift in consumer spending trends.

The European Central Bank (ECB) is expected to begin reducing borrowing costs in June. As reported by the Business Standard, Chief Economist Philip Lane of the ECB said that recent data have strengthened his belief that inflation is edging closer to the 2% target. While many ECB officials appear to support easing measures next month, President Christine Lagarde has not suggested further cuts at this point.

Gold

XAU/USD accelerated its recovery on Friday, as investors drop the USD. Dismal US employment-related figures revived hopes for a soon-to-come rate cut from the Fed.

Gold price (XAU/USD) gains momentum on Friday despite the modest rebound in US Dollar (USD). The yellow metal edges higher as many economists expect a weakening labor market could prompt the Federal Reserve (Fed) to cut interest rates sooner than currently expected to stimulate economic growth. Furthermore, the renewed geopolitical concerns are likely to be a positive factor for gold’s value on the market. 

However, the hawkish US Fed talks on the interest rate, and the stronger US dollar (USD) might weigh on gold prices. Gold traders will keep an eye on the first reading of the US Michigan Consumer Sentiment Index for May, along with the speeches from the Fed’s Bowman, Goolsbee, and Barr. Next week, the US Consumer Price Index (CPI) report will be in the spotlight. 

USD/INR Cash/Tom/Spot Levels: (in Paisa)

(Updated as on 10^th May 2024, @ 09.00am)

 Cash/Tom:    0.50/1.50                  Cash/Spot: 0.60/2.20

 Tom/Spot:     0.10/0.70                  Spot/Next:  0.10/0.70

Cash Date:   10^th May   2024

Tom Date:     11^th May   2024

Spot Date:    12^th May   2024

Outlook for the day 10^th May 2024

Rupee expected to trade in range of 83.40-83.60

MAJOR WORLD CURRENCIES: as on (09^th May, 2024)

Foreign Currencies

Updated: 17:30 hrs. (12:00 GMT) on 9^th May, 2024

Precious Metals

Updated: 17:30 hrs. (12:00 GMT) as on 09^th May, 2024

Stock Indices

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