TODAY: Thursday, 01^st August, 2024

USD/INR:

INR likely to open around 83.70/75

Dollar traded sideways against most currencies ahead of the FOMC decision today.  The Yen is stronger as Japanese officials continue to talk up intervention. 

Dollar Index is at 104.40, with EUR at 1.0820, GBP at 1.2840 and JPY at 152.25. The US 10y is subdued at 4.15%. US equities were mixed. DOW rose 0.5%, but the tech index fell1.3% on weak earnings. Indian equities traded flat.

Today’s FOMC is expected to be a status quo policy with unchanged rates. But markets expect language which confirms the start of the rate cut cycle in the next meeting which is in September. The jobs report on Friday will add to the anticipation on rate cuts as it will be the first majorr data after the FOMC. 

Rupee is virtually tethered now to the 83.70 band, with no real trigger in sight. Unless the FOMC springs a surprise today either way the Rupee will continue to remain docile and stuck.

MAJOR WORLD CURRENCIES:

The GBP/USD pair struggles to capitalize on the previous day's post-FOMC positive move and oscillates in a narrow trading band during the Asian session on Thursday. Spot prices currently trade around mid-1.2800s, nearly unchanged for the day as traders opt to wait on the sidelines ahead of the Bank of England (BoE) policy update.

Signs that inflationary pressures are receding globally have been fueling speculations that the UK central bank will cut interest rates later today. In fact, financial markets are pricing in over a 65% chance that the BoE will lower rates from a 16-year high of 5.25% and expect one more quarter-point cut before the end of the year. This, in turn, is seen acting as a headwind for the British Pound (GBP) and acting as a headwind for the GBP/USD pair. 

EUR/USD:

The EUR/USD pair rebounds to nearly 1.0835 during the Asian session on Thursday. The weaker US Dollar (USD) broadly after the Federal Reserve (Fed) interest rate decision provides some support to the major pair. The US ISM Manufacturing PMI data for July will be the highlight on Thursday. 

The Fed held its benchmark interest rates steady in a range of 5.25%-5.50% on Wednesday, a 23-year high, as widely expected. The Fed funds rate has been at this level since July 2023 as part of the Fed’s work to tame inflation back to the Fed’s target. 

With "some further" progress on inflation, Fed Chair Jerome Powell said that a September cut "could be on the table.” This, in turn, has exerted some selling pressure on the USD and created a tailwind for EUR/USD. 

Across the pond, inflation in the eurozone rose again in July, raising doubt on potential European Central Bank (ECB) interest rate cuts in September. Data released on Wednesday by Eurostat showed that the preliminary estimates of the Harmonised Index of Consumer Prices (HICP) in the Eurozone rose by 2.6% YoY in July, compared to 2.5% in the previous month. This figure exceeded the estimation of 2.4%. In response to the data, the Euro attracts some buyers as traders reconsider the probability that the ECB will cut interest rates at its meeting on September 14.

Gold

Gold price has paused its previous upswing in Asian trading on Wednesday, as buyers take a breather and gather pace ahead of the all-important US Federal Reserve policy announcements.

Gold price continued to witness good two-way businesses on Tuesday, initially lurking in the red, as traders appeared non-committal and refrained from placing fresh bets in the countdown to an action-packed economic calendar on both sides of the Atlantic.  

In anticipation of critical macro news, investors scurried for safety in the US Dollar (USD), weighing negatively on the USD-denominated Gold price.

However, in the second half of the day, Gold price rebounded firmly as the US Dollar lost its footing even though Wall Street indices were dragged lower by declines in megacap tech stocks pre-earnings results.

Additionally, US Dollar markets resorted to repositioning ahead of Wednesday's all-important US Federal Reserve (Fed) interest rate decision. Meanwhile, the end-of-the-month flows also played their part in the sharp US Dollar pullback, which helped Gold price stage an impressive comeback.

Gold traders paid little heed to the Euro area growth numbers and US JOLT Job Openings data ahead of the Fed showdown. The number of job openings on the last business day of June stood at 8.184 million, the US Bureau of Labor Statistics (BLS) reported in the Job Openings and Labor Turnover Survey (JOLTS) on Tuesday. 

In Wednesday’s trading so far, Gold price has entered a cautious mode, shrugging off the upbeat China’s official Manufacturing and Services PMI data, as traders prefer to stay on the sidelines in the lead-up to the key event risks – the US ADP employment data and the Fed policy announcements.

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

(Updated as on 01^st August, 2024, @ 09.00am)

 Cash/Tom: 0.05/0.60                   Cash/Spot:0.10/1.20

 Tom/Spot:  0.05/0.60                    Spot/Next: 0.25/1.75

Cash Date:  01.08.2024

Tom Date:   02.08.2024

Spot Date:   05.08.2024

Outlook for the day 01^st August, 2024

Rupee expected to trade in range of 83.62-83.76

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

Foreign Currencies

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

Precious Metals

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

Stock Indices

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