TODAY: Monday, 3^rd June, 2024

USD/INR:

INR likely to open around 83.15

Dollar is soft and US yields lower after Friday’s PCE inflation came in line with expectations and failed to provide any clarity on inflation trajectory or rate cut path. Dollar Index is at 104.55, with EUR at 1.0860, GBP at 1.2760 and JPY at 157.05. US 10y yield is down to 4.48%. DOW rallied 1% on Friday while Indian equities were closed moderately in the green.

Election exit polls over the weekend indicated a thumping victory to NDA and have already led to a potential strong open for the Rupee. Exit polls are projecting 350+ seats with some giving even 400+. Today’s market reaction could be positive and if indeed tomorrow’s results mirror exit polls, there is a possibility of a bull run in Indian markets. USDINR can push towards 82.50 in the short term, but long term prognosis remains negative for the Rupee,  as long as inflation remains sticky.

MAJOR WORLD CURRENCIES:

The EUR/USD pair extends the upside around 1.0850 on Monday during the early Asian session. The cooler US PCE inflation data and the better-than-expected Eurozone HICP inflation data provide some support for the major pair. The US ISM Manufacturing PMI for May will take center stage on Monday ahead of the European Central Bank interest rate decision on Wednesday.  

The Commerce Department's Bureau of Economic Analysis revealed on Friday that US inflation, as measured by the Personal Consumption Expenditures (PCE) Price Index, rose 0.3% on a monthly basis, as expected in April. On an annual basis, the PCE figure held steady at 2.7% YoY in April, matching March's increase and coming in line with the estimation.

The Core PCE Price Index, which excludes volatile food and energy prices, rose 2.8% on a yearly basis, in line with the market consensus. Core inflation was at its lowest level since March 2021. However, the recent data was not sufficient to trigger the Fed rate cut expectation, as investors believe the Fed needs more evidence to gain confidence that inflation is on course to reach its 2% target. 

GBP/USD:

The GBP/USD pair kicks off the new week on a subdued note and oscillates in a narrow band, around mid-1.2700s during the Asian session. The downside, meanwhile, remains cushioned in the wake of a modest US Dollar (USD) weakness, weighed down by signs of easing inflationary pressures in the United States (US). 

The US Bureau of Economic Analysis reported on Friday that the Personal Consumption Expenditure Price Index (PCE) held steady at 2.7% on a yearly basis in April. Adding to this, the Core PCE Price Index, which excludes volatile food and energy prices, matched consensus estimates and rose 2.8% on a yearly basis. The data should allow the Federal Reserve (Fed) to cut interest rates later this year. Apart from this, a generally positive risk tone seems to undermine the safe-haven USD, which, in turn, is seen acting as a tailwind for the GBP/USD pair. 

The British Pound (GBP), on the other hand, draws support from expectations that more persistent price pressures in the United Kingdom (UK) might force the Bank of England (BoE) to keep interest rates at their current level for a little bit longer. That said, the uncertainty ahead of the UK general election on July 4 is holding back the GBP bulls from placing aggressive bets and capping the upside for the GBP/USD pair. Traders now look to the release of the Manufacturing PMIs from the UK and the US for some impetus ahead of the US ISM Manufacturing PMI.

Gold

Gold price (XAU/USD) struggles to gain any meaningful traction during the Asian session on Monday amid a combination of diverging forces and languishes near a three-week low touched on Friday. Growing acceptance that the Federal Reserve (Fed) will start cutting rates later this year, bolstered by signs of easing inflationary pressures in the United States (US), continues to undermine the US Dollar (USD). This, along with persistent geopolitical risks, turn out to be key factors lending some support to the safe-haven precious metal. 

The upside for the Gold price, however, remains capped in the wake of a generally positive risk tone and hopes for a cease-fire in Gaza. Traders also seem reluctant and prefer to wait for this week's release of important US macro data scheduled at the beginning of a new month, including the Nonfarm Payrolls (NFP) report on Friday. Apart from this, key central bank event risks – the Bank of Canada (BoC) decision on Wednesday and the European Central Bank (ECB) meeting on Thursday – should influence the non-yielding yellow metal. 

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

(Updated as on 3^rd June 2024, @ 09.00am)

 Cash/Tom:  0.05/0.40                    Cash/Spot:0.10/0.80

 Tom/Spot:   0.05/0.40                    Spot/Next: 0.05/0.40

Cash Date:  03.06.2024

Tom Date:    04.06.2024

Spot Date:    05.06.2024

Outlook for the day 3^rd june 2024

Rupee expected to trade in range of 83.00-83.20

MAJOR WORLD CURRENCIES: as on (31^st May, 2024)

Foreign Currencies

Updated: 17:30 hrs. (12:00 GMT) on 31^st May, 2024

Precious Metals

Updated: 17:30 hrs. (12:00 GMT) as on 31^st  May, 2024

Stock Indices

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