NRI Newsletter - Market News

Last Updated on: 27/02/2024

NRI Newsletter - Market News

TODAY: Tuesday,27th February, 2024

 

USD/INR

 

Dollar is trading mild weaker and risk appetite is slightly shaky at the start of the inflation-data heavy week. Japanese inflation came in higher than expected, helping the JPY. US core PCE is also due this week, which if is stronger than expected, can cause some flutters in markets and help the Dollar. Dollar Index is at 103.75, with EUR at 1.0850, GBP at 1.2675 and JPY at 150.50. US equities closed in the red, and Indian equities remain under pressure with yet another broad negative close across indices yesterday. 

Rupee is slowly pushing the lower support of the current USDINR range. With the recent RBI stance to subdue volatility in the currency, it is unlikely that traders will take on the RBI on either side of the range unless there is a paradigm shift in global rate dynamics and Dollar outlook. As long as mild rate cut expectations remain, coupled with moderate slowdown in the economy, the Dollar has limited room to strengthen. On the other hand, sticky inflation can keep large rate cuts at bay and maintain Dollar stability. Until there is a shift in expectations on either of these directions, USDINR could trade a range with short-term biases within, depending on news and data flow.

 

MAJOR WORLD CURRENCIES:

USD:

 

The dollar was mostly lower on Monday ahead of U.S. durable goods orders and an inflation reading this week that could provide more information on how soon the Federal Reserve may begin cutting interest rates.

The dollar index, a measure of the greenback against a basket of currencies, was last down 0.2% at 103.78 - though the U.S. currency strengthened 0.1% to 150.71 against the Japanese yen.

 

U.S. durable goods data is due Tuesday, while January's U.S. personal consumption expenditures price index, which is the Fed's preferred measure of inflation, will be released Thursday.

The market has recently reduced expectations for the size and how soon it expects the Fed to cut rates, as the U.S. economy remains strong.

Markets have all but ruled out a cut at the Fed's March meeting and have recently pushed back expectations for a cut to June from May, CME's FedWatch Tool showed, following strong U.S. consumer and producer price data.

Japan's nationwide consumer prices also are due on Tuesday and are forecast to show core inflation slowed to an annual rate of 1.8% in January, the lowest since March 2022.

That would complicate the Bank of Japan's (BOJ) plans to end negative interest rates in coming months, keeping the yen under pressure in the near term.

The euro was last up 0.3% at $1.0852, after gains against the dollar in eight of the last nine trading sessions.

 

EUR:

 

EUR/USD is trading better bid near 1.0850 in the European morning on Tuesday. The pair stays supported amid a broadly subdued US Dollar and hawkish comments from ECB President Lagarde. The focus now shifts to the high-impact US economic data. 

Friday’s knee-jerk, EUR/USD managed to resume its multi-session recovery and revisited the 1.0860 region amidst an auspicious kickstart to the new trading week.

In fact, extra losses in the US dollar (USD) prompted the USD Index (DXY) to extend further its so-far two-week decline and flirt once again with the critical 200-day SMA. A convincing breakdown of this region carries the potential to open the gates to a deeper pullback in the short-term horizon at least.

The move higher in spot also came against the backdrop of the resurgence of the upward trend in US and German yields, always amidst ongoing speculation regarding a potential interest rate cut by the Federal Reserve (Fed) later in the year (maybe June).

Meanwhile, expectations for an interest rate cut in May continued to diminish. According to the CME Group's FedWatch Tool, there is approximately a 17% probability of a rate reduction by the Fed at its May 1 meeting, with the likelihood of such action rising to nearly 54% for June.

The possibility of the Federal Reserve (Fed) implementing a series of monetary easing measures in the coming months gained further traction following stronger-than-expected US inflation data in January, as indicated by CPI and PPI readings. This outlook is supported by robust underlying economic fundamentals and a consistently tight labour market.

The interplay between the US dollar dynamics and the potential interest rate cuts by the Fed (possibly starting in June) is expected to continue significantly influencing the price action of EUR/USD in the near term.

Concerning the European Central Bank (ECB), ECB Board member Yannis Stournaras stressed the importance of maintaining prudent monetary policy. He highlighted substantial progress in inflation, suggesting that reaching the 2% inflation target by autumn is highly likely. Stournaras recommended implementing the first rate cut in June, advocating for gradual adjustments of 25 bps at a time.

Later in the session, there was no news from President Christine Lagarde, after she stated that the ongoing disinflationary trend is anticipated to persist, requiring the Governing Council to have assurance that it will effectively guide us toward our 2% target in a sustainable manner. She anticipated inflation to further decelerate as the effects of previous upward pressures diminish, coupled with stringent financing conditions exerting downward pressure on inflation.

 

GBP:

 

GBP/USD is keeping its range trade intact below 1.2700 early Tuesday. A softer US Dollar and a cautious market mood are contributing to the bull-bear tug-of-war, as traders await the speeches from the BoE and the Fed policymakers alongside the US macro news. 

 

The GBP/USD pair extends the rally below the 1.2700 psychological barrier during the early Asian session on Tuesday. The FOMC minutes indicated that the Fed had reaffirmed a data-driven approach, leading to a more dovish outlook, which weighs on the US Dollar (USD) and creates a tailwind for the pair. At press time, GBP/USD is trading at 1.2685, gaining 0.02% on the day. 

A testimony to the UK Treasury committee by Bank of England (BoE) Governor Andrew Bailey and other policymakers last week prompted speculation of delay rate cuts, which lift the Pound Sterling (GBP). Bailey said that he would not forecast how many cuts there would be, but the bank was on a path toward lowering rates. 

He further stated that the central bank has shifted from a stance of how tight policy needs to be, and how high rates need to be, to how long the BoE needs to retain this stance to achieve sustained inflation. The markets have priced in four rate cuts at the end of this year after the BoE decided to maintain the interest rate unchanged at 5.25% earlier this month.  

 

Gold

 

Gold price (XAU/USD) regains some positive traction following the previous day's modest pullback and holds steady above the $2,030 level during the Asian session on Tuesday.

Gold price (XAU/USD) regains some positive traction following the previous day's modest pullback and holds steady above the $2,030 level during the Asian session on Tuesday. A fresh leg down in the US Treasury bond yields keeps the US Dollar (USD) bulls on the defensive, which, in turn, is seen acting as a tailwind for the commodity. Apart from this, a generally softer tone around the equity markets further benefits the precious metal's relative safe-haven status and remains supportive of the uptick.

That said, the Federal Reserve's (Fed) hawkish outlook for higher-for-longer interest rates might keep a lid on any meaningful appreciating move for the non-yielding Gold price. Traders might also refrain from placing aggressive directional bets and prefer to wait for the release of the US Personal Consumption Expenditures (PCE) Price Index on Thursday for cues about the likely timing of when the Fed will start cutting rates. This might further contribute to capping the upside for the precious metal.

 

USD/INR as on 26th February, 2024

Currency

OPEN

HIGH

LOW

CLOSE

USD/INR

82.8850

82.9075

82.86

82.89

 

 

Forward premium (%) as on  26th  February, 2024

Periods

1 Month

3 Month

6 Month

12 Month

Premium

1.10/1.25

1.47/1.52

1.49/1.52

1.73/1.74

       

 

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

(Updated as on 27th February, 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:   27th Feb 2024

Tom Date:     28th Feb 2024

Spot Date:    29th Feb 2024

Outlook for the day 26th February, 2024

Rupee expected to trade in range of 82.75-83.00

MAJOR WORLD CURRENCIES: as on (26th February, 2024)

 

CURRENCY

OPEN

HIGH

LOW

CLOSE

GBP

1.2662

1.2699

1.2654

1.2682

EUR

1.0824

1.0859

1.0811

1.0847

AUD

0.6547

0.6568

06529

0.6540

JPY

150.47

150.83

150.27

150.69

CHF

0.8805

0.8822

0.8786

0.8786

XAU

2033.54

2036.79

2024.91

2030.65

 

Foreign Currencies

Updated: 17:30 hrs. (12:00 GMT) on 26th   February, 2024

USD/INR: 82.8450 FXIR]

Against

USD

INR

1 EUR    =

1.0852

89.9577

1 GBP   =

1.2695

105.2352

100 JPY =

150.68

55.0139

1 AUD   =

0.6552

54.3128

1 CHF    =

0.8797

94.2310

 

Precious Metals

Updated: 17:30 hrs. (12:00 GMT) as on 26th February, 2024

Gold ($/oz)

2027.20

Silver ($/oz)

22.51

 

Stock Indices

 

Index Close

23rd February, 2024

26th February, 2024

BSE Sensex

73158.24

73142.80

NSE Nifty

22217.45

22122.05

Dow Jones

38612.24

39069.23

NASDAQ

15580.87

15976.25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Major Economic Data Releases for the Day

 

Date

Region

Time (IST)

Description

 

27/02/2024

USD

07.00PM

Durable Goods Orders m/m

 

27/02/2024

USD

07.00PM

Core Durable Goods Orders m/m

 

27/02/2024

USD

08.30PM

CB Consumer Confidence

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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