TODAY: Wednesday, 31^st July, 2024

USD/INR:

The rupee rose 2 paise to 83.71 against the US currency in early trade on Wednesday following a marginal dip in the dollar in overseas markets.

At the interbank currency exchange, the domestic currency opened at 83.72, 1 paisa higher than the previous day's close.

The domestic unit moved in the tight range of 83.70-83.72 in early trade.

Forex traders said the rise in Brent crude oil prices offset the rupee's gains following the decline in dollar rates overseas.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, declined 0.19 per cent to 104.36.

All eyes will be on the US Fed rate announcement later in the day. Expectations are ripe that the Federal Reserve might signal a rate cut as early as September.

In the domestic equity market, the 30-share BSE Sensex showed volatility, rising over 200 points in early trade to reach a record high before trading at 81,517.75, up 62.35 points, at 9.35 am.

Foreign institutional investors were net sellers in the capital markets on Tuesday, offloaded shares worth Rs 5,598.64 crore, according to exchange data.

MAJOR WORLD CURRENCIES:

The GBP/USD pair remains on the defensive near 1.2840 during the early Asian trading hours on Wednesday. The markets might turn cautious ahead of the Federal Reserve Interest Rate Decision on Wednesday, followed by the Bank of England policy meeting on Thursday. 

GBP/USD touched its weakest level in nearly three weeks below 1.2810 on Monday but managed to retrace its decline to end the day flat. The pair holds relatively stable slightly above 1.2850 in the European session but the technical outlook is yet to point to an extended recovery.

GBP/USD started the new week on the back foot as the US Dollar (USD) benefited from the risk-averse atmosphere. Investors, however, seem to remain reluctant to commit to a directional move in the pair ahead of the Federal Reserve and the Bank of England's monetary policy announcements on Wednesday and Thursday, respectively.

Early Tuesday, the UK's FTSE 100 Index is down 0.3% while US stock index futures trade marginally higher, reflecting a cautious market stance.

In the second half of the day, Conference Board Consumer Confidence Index for July and JOLTS Job Openings data for June will be featured in the US economic calendar. Unless there is a significant divergence between the market expectation of 8.03 million and the actual print in the job openings data, GBP/USD is likely to stay in a consolidation phase. A significant decline in job openings, with a reading below 7.5 million, could weigh on the USD with the immediate reaction.

EUR/USD:

EUR/USD stays firm above 1.0800, snapping the two-day losing streak in European trading on Wednesday. The further upside, however, appears elusive, as traders prefer to wait for the Eurozone inflation data and the Fed policy decision before placing fresh bets. 

EUR/USD charted humble losses on Tuesday, building on Monday’s pullback against the backdrop of a generalized cautious trade in light of the interest rate decision by the Federal Reserve (Fed) on Wednesday.

In contrast, the US Dollar could not sustain the early uptick and gave away those gains as the session drew to a close, particularly in response to the late and strong rebound in the Japanese yen, which regained buying traction after news that the BoJ might signal further tightening of its policy at its imminent gathering. Against that, the USD Index (DXY) settled around the mid-104.00s following earlier multi-day highs near 104.80.

Additionally, the daily gains in the USD were accompanied by a decline in US and German yields, as investors are anticipating rate cuts from both the Fed and the European Central Bank (ECB) after the summer.

Regarding monetary policy, the Fed is expected to maintain current rates at the July 31 meeting, but Chief Jerome Powell may signal the start of an easing cycle in September.

Similarly, recent comments from ECB Vice President Luis de Guindos suggest a potential rate cut by the ECB in September.

The policy divergence between the Fed and the ECB is likely to remain steady, with both expected to cut rates soon. However, the US is expected to experience a soft landing, while the Eurozone's recovery is losing momentum, possibly weakening the Euro further in the medium term.

On the domestic calendar, Germany’s flash Inflation Rate saw the CPI rise more than expected by 2.3% in the year to July, while the flash GDP Growth Rate in Germany surprised to the downside after the economy is now seen contracting by 0.1% QoQ and YoY. In the broader euro bloc, the flash GDP Growth Rate came in above estimates and expects the economy of the bloc to expand by 0.3% QoQ in Q2 and 0.6% YoY.

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 31^st July 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:  31.07.2024

Tom Date:   01.08.2024

Spot Date:   02.08.2024

Outlook for the day 31^st July , 2024

Rupee expected to trade in range of 83.62-83.76

MAJOR WORLD CURRENCIES: as on (30^th July, 2024)

Foreign Currencies

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

Precious Metals

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

Stock Indices

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