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NRI Newsletter - Market News

Last Updated on: 16/04/2024

NRI Newsletter - Market News

TODAY: Tuesday, 16th April, 2024

 

USD/INR:

 

USDINR is set to break the all-time onshore highs at today’s open, but the sustainability will depend on the RBI’s response. Global Dollar is on a tear against most currencies, as risk aversion led safe-haven demand is complementing the inflation concerns and keeping the Dollar buoyant. US retail sales came in much better than expected, adding to fears that rate cuts might be delayed further.

 

Dollar Index is at 106.40, with EUR at 1.0610, GBP at 1.2425 and JPY at 154.30. The JPY depreciation is especially critical for the Rupee, as the markets are willing to take on the BOJ even as the zero rate policy in Japan is scrapped. The US yields remain high despite risk aversion, indicating the concern that the ongoing strength in the economy will preclude any dovishness from the Fed. The 10y US yield is at 4.6%. US equities again fell 1%+ yesterday, pressured by the rising US yields and geopolitical concerns. Indian indices also cracked 1%+ and are set for more pain today, following the overnight US equity performance.

The Israel-Iran escalation has the potential to move into a full-blown middle-eastern war, disrupting oil supplies, souring the inflation outlook further. While there could be the initial jitteriness in markets and risk aversion, leading to Dollar strength, a scenario of major war can quickly become market-positive if the Fed uses that development to hasten rate cut citing weak financial conditions. In the short-term INR will remain under pressure, pushing on the upper resistance level of the current range. The medium-term prognosis for the Rupee still remains uncertain and heavily dependent on RBI’s though process.

 

MAJOR WORLD CURRENCIES:

USD:

A rally in the U.S. dollar is accelerating, as stubborn inflation sows doubts over how aggressively the Federal Reserve will be able to cut rates this year compared to other central banks.

The U.S. dollar index, which measures the greenback against a basket of six major currencies, is up 4.6% this year and stands near its highest levels since early November. The index rose 1.7% last week, its biggest weekly gain since September 2022.

The greenback is advancing as market participants grow convinced the Fed will need to leave interest rates at current levels for longer to avoid a potential resurgence of inflation. Last week's stronger-than-expected consumer price data bolstered that view: investors late Friday were pricing in just 50 basis points of interest rate cuts in 2024, futures markets showed, compared to 150 basis points priced in at the start of the year.

Bullish investors have increased their bets on the dollar, while bears have wavered. Net bets on the dollar in futures markets stood at $17.74 billion in the latest week, data from the Commodity Futures Trading Commission showed, the highest level since August 2022.

Central bank policy has diverged in recent months, reflecting economies' varying struggles to contain inflation.

The Swiss National Bank reduced rates by 25 bps in March, its first cut in nine years. Sweden's central bank has signaled it could cut rates in May if inflation keeps falling, while the Bank of Canada recently suggested it was ready to ease.

Central banks in Australia, Britain and Norway, on the other hand, appear less eager to loosen monetary policy.

 

 

GBP:

 

GBP/USD trades marginally lower on the day below 1.2450 in the early European session on Tuesday. The data from the UK showed that the ILO Unemployment Rate in February rose to 4.2% from 4%, weighing on Pound Sterling.

 

Bears have pushed the pair back to the bottom of the monthly descending channel, at 1.2440, which is being tested at the moment. Last Friday’s low is right below there, at 1.2430. A clear break of that support area clears the path towards 1.2370. Further down there is no support until 1.2220.

On the upside 1.2505 level should be cleared to advance towards 1.2565, where an unmitigated order block may provide a fresh boost for bears.

Sterling’s recovery attempts have failed to find a significant acceptance above the 1.2500 level earlier on Monday. The pair has succumbed to the broad-based US Dollar strength after the release of upbeat US retail sales figures.

US Consumer spending has beaten expectations in MArch adding to the evidence of a strong US economic outlook. Beyond that, growing concerts about the consequences of an escalation in the Middle East conflict are additional support for the safe-haven USD.



 

EUR:

 EUR/USD is holding above 1.0600 in the European morning on Tuesday, having hit fresh five-month lows. The pair draws support from sluggish US Treasury bond yields but the rebound appears capped amid a stronger US Dollar and risk-aversion. Germany's ZEW survey and Powell awaited. 

Following a short-lasting recovery attempt during the European trading hours, EUR/USD lost its traction and closed the first trading day of the week in negative territory. The pair struggles to stage a rebound and trades within a few pips of 1.0600 early Tuesday.

Easing geopolitical tensions limited the US Dollar's (USD) upside in the first half of the day on Monday and helped EUR/USD edge higher. After the data from the US showed that Retail Sales increased at a stronger pace than expected in March, however, US Treasury bond yields shot higher and allowed the USD to regather its strength.

Meanwhile, Federal Reserve (Fed) Bank of San Francisco President Mary Daly cautioned against acting urgently, saying that they need to be confident that inflation is on its way to the 2% target before taking a policy action.

Housing Starts and Building Permits data for March will be featured in the US economic docket on Tuesday. Later in the American session, Fed Chairman Jerome Powell will speak alongside Bank of Canada Governor Tiff Macklem on the economic outlook and monetary policymaking.

The CME FedWatch Tool shows that markets see a nearly 80% probability that the Fed will hold the policy rate unchanged in June. This positioning suggests that the USD has some more room on the upside in case Powell adopts a hawkish tone.

In the meantime, US stock index futures trade in negative territory. In case Wall Street's main indexes continue to push lower following Monday's sharp decline, the USD could benefit from safe-haven flows and make it difficult for EUR/USD to find a foothold.

 

Gold

Gold price consolidates the rebound below $2,400 amid risk-aversion. Dollar gains on strong US Retail Sales data despite easing Middle East tensions. Bullish potential for Gold price still intact on favorable four-hour technical setup.

Gold price is gathering strength to extend the previous upswing above $2,400 in Asian trading on Tuesday. Gold price stays supported by a minor pullback in the US Treasury bond yields from multi-month highs even as the US Dollar sees a fresh leg higher amid broad risk-aversion.

Gold price awaits Fed Chair Powell’s speech

Asian markets are in a sea of red, as traders weigh the likelihood of delay in the US Federal Reserve (Fed) interest rate cuts following strong US Retail Sales data reported on Tuesday. Retail Sales rose 0.7% last month and data for February was revised higher to show sales rebounding 0.9% instead of 0.6% as previously reported. The market forecast was for a 0.3% increase.

Chances that the Fed will hold rates in July and September rose above 50% after the data release, lifting the US Dollar alongside the US Treasury bond yields while smashing Wall Street stocks. Risk-aversion extended into Asia to sponsor the latest leg higher in the Greenback against its major peers. The US Dollar Index is challenging five-month highs near 106.40, at the time of writing.

Mixed China’s Gross Domestic Product (GDP) and activity data also added to the downbeat risk tone, underpinning the US Dollar’s haven demand. China's economy grew 5.3% in the first quarter of 2024, surpassing estimates of a 5.0% growth. Despite this, March Retail Sales and Industrial Output fell short of expectations. China's property market struggles persist, with 1Q New Home Sales falling nearly 31% over the year.

Further, hawkish comments from San Francisco Fed President Mary Daly bolstered the Greenback. Daly said on rate cuts, “the worst thing to do is act urgently when urgency isn't necessary.”

However, Gold price appears resilient to a firmer US Dollar, helped by a retreat in the US Treasury bond yields from multi-month highs. Easing geopolitical tensions between Israel and Iran also fails to deter Gold buyers, as they bide time before the next push higher.  

Investors, however, remain on a cautious footing, as a renewed flare-up in Israel and Iran conflict cannot be ruled out. Next of note for Gold traders remain Fed Chair Jerome Powell’s speech and speeches from a few other Fed policymakers, as the US economic docket is relatively light this Tuesday.

Geopolitical developments in the Middle East will be closely followed for fresh trading incentives in Gold price.

 

USD/INR as on 15th  April, 2024

Currency

OPEN

HIGH

LOW

CLOSE

USD/INR

83.4350

83.4525

83.4175

83.45

 

 

Forward premium (%) as on  15th April , 2024

Periods

1 Month

3 Month

6 Month

12 Month

Premium

0.96/1.09

1.11/1.15

1.27/1.29

1.63/1.64

       

 

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

(Updated as on 16th April, 2024, @ 09.00am)

 

 Cash/Tom:    0.15/1.00                  Cash/Spot: 0.25/1.75

 Tom/Spot:     0.10/0.75                  Spot/Next:  0.20/1.25

 

Cash Date:   16th   April    2024

Tom Date:     18th   April    2024

Spot Date:    19th   April    2024

Outlook for the day 16th April, 2024

Rupee expected to trade in range of 83.40-83.55

MAJOR WORLD CURRENCIES: as on (15th April, 2024)

 

CURRENCY

OPEN

HIGH

LOW

CLOSE

GBP

1.2450

1.2498

1.2433

1.2444

EUR

1.0635

1.0665

1.0618

1.0622

AUD

0.6463

0.6493

0.6436

0.6441

JPY

153.07

154.44

152.98

154.27

CHF

0.9122

0.9151

0.9112

0.9114

XAU

2343.36

2387.39

2324.29

2382.56

 

Foreign Currencies

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

USD/INR: 83.4550FXIR]

Against

USD

INR

1 EUR    =

1.0657

88.9380

1 GBP   =

1.2493

104.2603

100 JPY =

153.91

54.2232

1 AUD   =

0.6484

54.1122

1 CHF    =

0.9133

91.3774

 

Precious Metals

Updated: 17:30 hrs. (12:00 GMT) as on 15th April, 2024

Gold ($/oz)

2382.56

Silver ($/oz)

28.44

 

Stock Indices

 

Index Close

12th April, 2024

15th April, 2024

BSE Sensex

74244.90

73399.78

NSE Nifty

22519.40

22272.50

Dow Jones

37983.24

37735.11

NASDAQ

16175.09

15885.02

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Major Economic Data Releases for the Day

 

Date

Region

Time (IST)

Description

 

16.04.2024

CNY

7.30am

Industrial Production y/y

 

GDP m/m

16.04.2024

CNY

7.30am

GDP q/y

 

 

16.04.2024

CNY

7.30am

Retail Sales y/y

 

 

16.04.2024

GBP

11.30am

Claimant Count Change

 

 

16.04.2024

GBP

11.30am

Average Earnings Index 3m/y

 

 

16.04.2024

CAD

6.00pm

 

CPI m/m

 

 

16.04.2024

CAD

6.00pm

 

Median CPI y/y

 

 

16.04.2024

CAD

6.00pm

 

Trimmed CPI y/y

 

 

16.04.2024

CAD

6.00pm

 

Common CPI y/y

 

 

16.04.2024

USD

6.00pm

 

Building Permits

 

 

16.04.2024

USD

6.45pm

Industrial Production m/m

 

 

16.04.2024

GBP

10.30pm

BOE Gov Bailey Speaks

 

 

16.04.2024

USD

10.30pm

FOMC Member Barkin Speaks

 

 

16.04.2024

CAD

10.45pm

BOC Gov Macklem Speaks

 

 

16.04.2024

USD

10.45pm

Fed Chair Powell Speaks

 

 

 

The views contained herein are those of individuals and not necessarily those of the Bank.  This is for information purpose only and no recommendations are intended.  While due care has been taken in preparation of this communication, IOB cannot be held responsible for any consequences of any decisions based on this information. Comments/Suggestions may be freely emailed to feddeal@iobnet.co.in