TODAY: WEDNESDAY, 30^th May, 2024

USD/INR:

INR likely to open around 83.25

Dollar retreated yesterday after weaker-than-expected GDP data for Q1 of this year. US 10y is also down as a result. Dollar Index is at 104.75, with EUR at 1.0830, GBP t 1.2730 and JPY at 156.65. US 10y is down to 4.53%. The fall in the 10y is a good sign for risk appetite and INR can be now stable again, ahead of today’s PCE inflation data. US equities continued to be under pressure, and DOW fell 0.86% yesterday. Indian equities also are now tentative. Sensex fell 0.8%+ yesterday. The reversal in the 10y might help stabilize Indian equities.

INR is heading into a volatile week  next week, as election outcome can put Indian markets on a sustained directional path on both directions. Tomorrow’s exit poll can create some flutters in Monday trading, but the 4^th of next month remains the key. The PCE today is important for US yields, but elections remain more important, especially if the mandate is decisive either ways.

MAJOR WORLD CURRENCIES:

On Thursday, the US Dollar Index (DXY) experienced a retreat after a sharp recovery on Wednesday. The gains linked to the bond market surge on Wednesday are now being undone following the release of US Gross Domestic Product (GDP) revisions and soft Jobless Claims figures.

Despite some signs of a softening labor market, the likelihood of cuts in June and July remains low. However, there is heightened anticipation for the Personal Consumption Expenditure (PCE) figures due out on Friday, which have the potential to influence the next Federal Reserve (Fed) expectations.

The increasing selling pressure in the Greenback lends extra legs to EUR/USD and motivates it to retarget the key barrier at 1.0900 the figure as investors continue to assess the release of the US inflation data measured by the PCE.

Following Wednesday's sharp decline, EUR/USD staged a rebound and closed in positive territory on Thursday. The pair fluctuates above 1.0800 in the European session as investors move to the sidelines ahead of key inflation data.

The US Bureau of Economic Analysis (BEA) revised the annualized first-quarter Gross Domestic Product (GDP) growth lower to 1.3% from 1.6% in the initial estimate. In turn, the benchmark 10-year US Treasury bond yield corrected lower and lost more than 1% on Thursday, making it difficult for the US Dollar (USD) to preserve its strength. 

Eurostat will publish the preliminary Harmonized Index of Consumer Price (HICP) data for May on Friday. Investors expect the core HICP to rise 2.8% on a yearly basis. A reading below the market expectation could weigh on the Euro with the immediate reaction.

In the second half of the day, the BEA will release the Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve's (Fed) preferred gauge of inflation, for April. Market participants will pay close attention to the monthly core PCE Price Index, which is forecast to rise 0.3% to match March's increase. A reading of 0.2% or lower could revive expectations for a Fed rate cut in September and trigger a USD selloff heading into the weekend. On the other hand, EUR/USD could stay on the back foot if the monthly core PCE rises 0.4% or more. In this scenario, safe-haven flows could dominate the action in the American session and provide an additional boost to the USD.

GBP/USD:

The Pound Sterling (GBP) comes under pressure in Friday’s London session as the sharp recovery move from a four-day low near 1.2680 appears to have lost momentum. The GBP/USD treads cautiously amid uncertainty ahead of the publication of the United States core Personal Consumption Expenditure Price Index (PCE) data for April, which will be released at 12:30 GMT.

The core PCE inflation data, which is the Federal Reserve’s (Fed) preferred inflation measure, is estimated to have grown steadily by 0.3% and 2.8% on monthly and annual basis, respectively. Investors will keenly focus on this report as it could provide significant cues about the Fed’s rate-cut path.

The scenario of core PCE data coming in line with expectations is less likely to move the Fed towards rate cuts in September as Fed policymakers have said they want to see inflation declining for months before considering a policy-normalization move. A hotter-than-expected inflation reading would significantly impact market speculation for the Fed reducing interest rates by delaying the move towards November, while soft figures would boost prospects of the Fed lowering key borrowing rates from September.

Gold

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

(Updated as on 31^st  May 2024, @ 09.00am)

 Cash/Tom:  0.40/2.00                    Cash/Spot:0.50/2.80

 Tom/Spot:   0.10/0.80                    Spot/Next: 0.10/0.80

Cash Date:  31.05.2024

Tom Date:    03.06.2024

Spot Date:    04.06.2024

Outlook for the day 31^th May 2024

Rupee expected to trade in range of 83.30-83.50

MAJOR WORLD CURRENCIES: as on (30^th May, 2024)

Foreign Currencies

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

Precious Metals

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

Stock Indices

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