TODAY: Tuesday, 9th July, 2024

USD/INR:

Dollar is stable, looking forward to Powell testimony today and tomorrow. EUR is holding fort, waiting for developments in France, as the country is now under a hung parliament, dominated by left wing parties. GBP is higher on hopes of stable labor party government. JPY is still tentative, even as US rate cut hopes continue to increase after the last week’s US payroll. The Rupee is just stuck to the range, with minimal reactions to the global developments.

Dollar Index is at 105.05, with EUR at 1.0825, GBP at 1.2805 and JPY at 161. US 10y is lower, at 4.27%. Markets are pricing in around 75% chance of a rate cut in September. Today’s Powell testimony is important to gauge how dovish he would sound. US equities sideways and mixed and Indian indices traded mildly in the red.

The Rupee has no real triggers now to take it significantly above the current range, nor are there beneficial factors which can pull USDINR down. The current story is set to remain for the foreseeable few months, unless there are unexpected geopolitical or liquidity events which surface. US CPI this week is expected to be just around the consensus estimate and as long as the data does not show a multi-standard deviation divergence from consensus, markets will continue to gradually adjust rate cut probabilities, keeping USDINR tethered. With volatilities also down, innovative exotic option hedges can be looked at on a case by case basis to improve hedging outcomes.

MAJOR WORLD CURRENCIES:

GBP/USD:

GBP/USD briefly tested a fresh four-week high on Monday, crossing above 1.2840 before broad-market flows dragged Cable back down to the week’s opening bids just north of 1.2800. UK data remains thin this week, leaving traders grappling with peaking rate cut hopes clashing with an overly-cautious Federal Reserve (Fed) that insists on waiting for further signs that US inflation will ease towards the Fed’s 2% annual inflation target.

Key US inflation data is due later in the week, with US Consumer Price Index (CPI) inflation due on Thursday and Producer Price Index (PPI) wholesale inflation slated for Friday. Traders hoping for further easing in inflation figure to help bully the Fed into rate cuts sooner rather than later may be setting themselves for disappointment later in the week with both CPI and PPI inflation figures forecast to either hold steady or tick upwards slightly.

UK data also remains limited this week, with various appearances from Bank of England (BoE) policymakers slated for Wednesday and industrial and manufacturing activity survey results on the books for Thursday. UK Industrial and Manufacturing Production are both expected to rebound in May after the previous month’s slight contraction.

Gold

Gold price is attempting a tepid bounce while defending the $2,350 psychological support in Asian trading on Tuesday.

The renewed uptick in Gold price could be attributed to the downside consolidation phase of the US Dollar and the US Treasury bond yields. Traders eagerly await US Federal Reserve (Fed) Chairman Jerome Powell’s congressional testimonies for fresh hints on the interest-rate cut timing.

Markets are pricing a 77% chance that the Fed will lower rates in September, according to the CME Group’s FedWatch Tool. Another cut is expected by December.

Friday’s disappointing US labor market report affirmed a Fed rate cut in September after the headline Nonfarm Payrolls (NFP) increased by 206,000 in June, beating the market forecast for a 190,000 gain but April and May readings were significantly revised down by a combined 111,000. Average hourly earnings rose 3.9% year-on-year, as expected, registering its lowest since the second quarter of 2021.

Fed Chair Powell’s words could reinforce dovish Fed expectations, lifting Gold price to all-time highs beyond $2,400 at the expense of the US Dollar and the Treasury bond yields. Powell delivers two days of testimony before the Senate Banking Committee, beginning later on Tuesday and followed by the House Financial Services Committee on Wednesday.

Besides, several other Fed policymakers are also likely to speak on Tuesday, which could drive the Gold price action amid a data-light US calendar.

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

(Updated as on 09^th July 2024, @ 09.00am)

 Cash/Tom: 0.10/0.75                    Cash/Spot:0.20/1.50

 Tom/Spot:  0.10/0.75                    Spot/Next: 0.10/0.75

Cash Date:  09.07.2024

Tom Date:   10.07.2024

Spot Date:  11.07.2024

Outlook for the day 09^th July, 2024

Rupee expected to trade in range of 83.40-83.60

MAJOR WORLD CURRENCIES: as on (08^th July , 2024)

Foreign Currencies

Updated: 17:30 hrs. (12:00 GMT) on 08^th July , 2024

Precious Metals

Updated: 17:30 hrs. (12:00 GMT) as on 08^th July , 2024

Stock Indices

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