TODAY: Tuesday, 13^th August, 2024

USD/INR:

  Dollar is steady and markets are trading calm after a tumultuous week last week. US CPI is due this week and the narrative will now shift to the economy and FOMC rate cuts again. Dollar Index is at 103.20, with EUR at 1.0915, GBP at 1.2755 and JPY at 146.75. US equities managed a green close on Friday, and Indian equities also staged a 1%+ up tick to close last week.

With JPY settling down for now, the focus of markets is now squarely back on the US inflation data. With the FOMC reiterating data dependency, this CPI is now critical before the September FOMC meeting. Signs of further reduction in inflation could give the Fed the reason to move ahead with higher quantum of rate cuts. The consensus is for a 2.3% print on the headline number, and anything lower than that will be cheered.

MAJOR WORLD CURRENCIES:

GBP/USD posted gains for the second consecutive day on Friday but ended up closing the week in negative territory. The pair stays relatively quiet in the European session on Monday and trades in a narrow band slightly above 1.2750.

Several news outlets reported over the weekend that Israel was on high alert, expecting an imminent from Iran. Meanwhile, Israel Defense Forces said that intercepted about 30 "projectiles" that were crossing from Lebanon into northern Israel.

The cautious market mood on growing fears over a deepening crisis in the Middle East cause investors to stay away from risk-sensitive assets, helping the US Dollar (USD) stay resilient against its rivals and making it hard for GBP/USD to extend its recovery.

On Tuesday, the UK's Office for National Statistics (ONS) will release employment data. More importantly, the Consumer Price Index (CPI) data from the UK and the US on Wednesday will be watched closely by market participants. Hence, GBP/USD could struggle to find direction ahead of inflation figures.

EUR/USD:

After many days of losses, EUR/USD finally managed to regain some balance and advance to the 1.0940 region at the beginning of the week, ending the session with decent gains amidst the generalized flat-lined mood in the broader FX galaxy.

Across the road, the Greenback traded in a vacillating fashion in the low-103.00s when tracked by the US Dollar Index (DXY), always following the investors’ wide cautious view ahead of the publication of key US fundamentals later in the week.

That said, upcoming US inflation figures tracked by the CPI on Wednesday and Retail Sales due on Thursday should give markets an idea of the Fed's intentions to start trimming its interest rates in September, and maybe by how much. In addition, those readings could also shed further light on how the US economy is faring and, most importantly, if recent recession concerns are well justified.

On a more local perspective, the Economic Sentiment in both Germany and the broader Euroland is expected to recede further in the current month, mirroring the loss of momentum mainly in German economic activity as well as in key sectors in the euro bloc.

Gold

Markets eagerly await the high-impact inflation data from the US to gauge whether a big interest-rate hike by the US Federal Reserve (Fed) is in the offing, especially following the weak jobs report, which triggered recessionary fears and ramped up aggressive Fed rate cut bets.

Markets are now pricing in about 50% chance of a 50 bps rate cut in September by the Fed, according to the CME Group’s FedWatch Tool. Meanwhile, the headline annual CPI is set to rise 2.9% in July afte increasing by 3.0% in June. Meanwhile, the core inflation is expected to edge a tad lower to 3.2% YoY in July versus June’s 3.3% print.

That said, the US headline annual PPI is seen rising 2.3% in July after reporting a 2.6% growth in June. The core PPI inflation is set to decline from 3.0% YoY in June to 2.7% in July. The likely progress in disinflation will pave the way for a notable easing by the Fed, which could bode well for the non-interest-bearing Gold price.

Amidst increased dovish Fed expecttions, the US Treasury bond yields remain on the losing end, also hit by the rife Middle East tensions, which drive risk-off flows into the safe-haven assets such as the US government bonds and Gold price.

The traditonal safety bet, Gold price, jumped over 1% on risk aversion, courtesy of the from heightened tensions in the Middle East. White House spokesman John Kirby said late Monday that Iran could launch ‘significant’ attack on Israel this week and that the timing could affect Gaza ceasefire talks, currently scheduled to resume on August 15.

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

(Updated as on 13^th August, 2024, @ 09.00am)

 Cash/Tom: 0.05/0.70                   Cash/Spot:0.15/2.10

 Tom/Spot:  0.10/1.40                    Spot/Next: 0.15/2.10

Cash Date:  13.08.2024

Tom Date:   14.08.2024

Spot Date:   16.08.2024

Outlook for the day 13^th  August, 2024

Rupee expected to trade in range of 83.90-84.00.

MAJOR WORLD CURRENCIES: as on (12^th August, 2024)

Foreign Currencies

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

Precious Metals

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

Stock Indices

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