TODAY:Friday,09th June, 2023

USD/INR

Dollar traded weak yesterday after US jobless claims came in higher than expected, triggering hopes that the economy is slowing and would force the Fed to pause/cut rates. The RBI monetary policy was on expected lines as they kept rates unchanged. RBI downgraded inflation forecasts slightly and kept growth projections same, implying that status quo on rates might continue for a few more months.

Dollar Index is at 103.30, with EUR at 1.0785, GBP at 1.2555 and JPY at 139.15. US yields are lower from intra-day levels, and the 10y is at 3.73%. DOW closed 0.5% higher and the tech index rose 1%. Indian markets were choppy yesterday and Nifty fell 0.5%. 

US jobless claims were the highest in 1.5 years, and markets hoped that labor market is cooling down nudging the Fed to pause. All hinges now on the coming inflation print, which if remains sticky, can quash dovish expectations quickly. But, if inflation shows even moderate signs of slowing down, Dollar could see a short-term reversal of the recent rally. USIDNR remains in a tight range, and can expect to trade so until the next week’s CPI.

MAJOR WORLD CURRENCIES:

USD:

The dollar fell on Thursday after data showed that U.S. jobless claims rose more than expected in the latest week, though the market was generally viewed as consolidating ahead of key inflation data and the Federal Reserve’s interest rate decision next week.

The number of Americans filing new claims for unemployment benefits surged to the highest level in more than 1-1/2 years last week with a 28,000-claim jump to a seasonally adjusted 261,000. Economists polled by Reuters had forecast 235,000 claims for the latest week.

“Claims (were) a bit higher than expected,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York, but “we’re still in a consolidation mode ... right now we’re just trapped.”

The greenback has been bolstered by expectations that the Fed will hike rates in July, though it is widely expected to pause hikes at the conclusion of its June 13-14 meeting.

But worsening economic data may also limit how many further rate increases the U.S. central bank is able to achieve even if inflation pressures remain high.

“There is a small window of opportunity for the Fed to raise rates again, whether it's June or July, and the market now favors July ... the market doesn’t think there’s anything more to be done because the economy looks set to weaken,” said Chandler.

The euro was last up 0.75% against the dollar at $1.0779. The single currency gained despite data showing that the euro zone economy was in a technical recession in the first three months of 2023. It got as high as $1.07870, the highest since May 24.

The greenback fell 0.87% to 138.94 yen.

EUR:

The EUR/USD had its best performance in weeks on Thursday on the back of a weaker US Dollar. The Greenback fell across the board following softer employment data from the US, ahead of next week's FOMC meeting. The outlook points to further gains in the near term.

The downward revisions in Euro area Q1 GDP did not affect the Euro. Growth was revised from 0.1% QoQ to -0.1% QoQ. Growth across countries was mixed, with Italy and Spain showing a 0.5% expansion, France a 0.2%, and Germany a contraction of 0.3%. The numbers do not alter expectations for next week's European Central Bank meeting. A 25 basis points rate hike is priced in. More important than the decision could probably be the updated macroeconomic forecasts.

The rally in EUR/USD on Thursday was driven by a weaker US Dollar, risk appetite, and technical factors. In the US, Initial Jobless Claims rose unexpectedly to the highest level since October 2021. These numbers continue to ease hawkish expectations from the Federal Reserve. The key report, however, will be next Tuesday's release of the May Consumer Price Index, the day before the FOMC decision.

Wall Street cheered the negative employment numbers. Risk appetite added extra weight to the US Dollar. On Friday, the highlight of the economic calendar will be a speech from ECB's Guindos. Ahead of the Asian session, the US Dollar continues to look weak and could extend losses after some consolidation. A deterioration in market sentiment would limit the upside and could favor a sharp correction.

GBP:

GBP/USD climbed to 1.2500 on Wednesday but retreated toward 1.2450 early Thursday. The near-term technical outlook suggests that the pair needs to flip 1.2480 into support to rise further.

On Wednesday, rising UK gilt yields helped Pound Sterling stay resilient against its major rivals. Interest-rate sensitive two-year gilt yield rose more than 2% to 4.6% and touched its highest level since September, when former British Prime Minister Liz Truss' 'mini-budget' triggered a gilt selloff.

Unexpected rate hikes by the Reserve Bank of Australia (RBA) and the Bank of Canada (BoC) this week reminded investors of major central banks' willingness to cling to tight monetary policies in the face of persistent global inflation pressures. 

During the European trading hours on Thursday, the 2-year UK gilt yield is down nearly 1% on the day, making it difficult for GBP/USD to gather bullish momentum. Additionally, the UK's FTSE 100 Index stays in negative territory, limiting risk-sensitive Pound Sterling's potential gains.

The US Department of Labor will release the weekly Initial Jobless Claims data, which is forecast to rise modestly to 232,000 from 230,000. A reading above 250,000 could play into expectations of the Federal Reserve leaving its policy rate unchanged at the upcoming policy meeting, supporting GBP/USD. On the other hand, a decline toward 200,000 should allow the US Dollar (USD) to outperform its rivals. Ahead of next Tuesday's all-important Consumer Price Index (CPI) figures, however, investors are likely to refrain from taking large positions based on this data alone.

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

(Updated as on 09th June, 2023 @ 09.00am)

 Cash/Tom:     0.50/1.25                  Cash/Spot: 0.60/2.15

 Tom/Spot:      0.50/0.90                  Spot/Next:  0.10/0.90

 Cash Date:  09th June  2023

 Tom Date:    12th June  2023

 Spot Date:   13th June  2023

Outlook for the day 09th June, 2023

Rupee expected to trade in range of 82.40 -82.70.

MAJOR WORLD CURRENCIES: as on (08thMay, 2023)

GOLD:

Gold price staged a solid comeback on Thursday, gaining as much as $24, as bulls extended the early bounce amid the extended weakness in the US Dollar alongside the US Treasury bond yields. The Bank of Canada’s (BoC) surprise rate hike-driven renewed optimism surrounding a US Federal Reserve (Fed) rate hike next week faded after the United States Initial Jobless Claims jumped to the highest level since October 2021 at 261K last week. Weak US jobs data helped cement expectations that the Federal Reserve will pause its tightening cycle. The probability of a Fed rate hike pause in June now stands at 75%, up from around 65% seen before the US data release.

Following the discouraging data, the US Dollar came under intense selling pressure along with the US Treasury bond yields. The benchmark 10-year US Treasury bond yields corrected sharply from weekly highs near 3.81% and erased almost half of Wednesday’s gains to settle the day near 3.71%. These factors rekindled the demand for the non-yielding Gold price, as bulls left no stone unturned to capitalize on heightened dovish Fed expectations.

On the final trading day of the week, Gold buyers are trading with caution, in anticipation of a volatility surge, as investors could resort to repositioning heading into the weekly close and ahead of the top-tier United States Consumer Price Index (CPI) data and the Federal Reserve policy announcements due next week. In the absence of any high-impact US economic data releases, the broader market sentiment will play a pivotal role in the Gold price valuations, as markets assess the softer-than-expected Chinese inflation data. Weakening price pressures in the gold’s biggest consuming nation are boding ill for Gold optimists.

China’s Producer Price Index (PPI) inflation for May fell for an eighth consecutive month, down 4.6% on an annual basis. Meanwhile, the country’s CPI rose 0.2% vs. expectations of a 0.3% increase in the reported month.

Foreign Currencies

Updated: 17:30 hrs. (12:00 GMT) on 08thJune, 2023

Precious Metals

Updated: 17:30 hrs. (12:00 GMT) as on 08thJune, 2023

Stock Indices

(As on 08thMay, 2023)

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