TODAY: Friday, 21st June, 2024

USD/INR:

The Indian Rupee (INR) gains ground on Friday due to the modest decline of the US Dollar (USD). The significant inflows into the Indian bond market ahead of India’s inclusion in the JPMorgan Emerging Market bond index at the end of this month are likely to boost the local currency in the near term. 

On the other hand, the renewed Greenback demand from local importers, likely capital outflows, and the weakening in the Chinese Yuan might exert some selling pressure on the INR. Additionally, the rally in crude oil prices might drag the INR lower as India is the third-largest consumer of crude oil in the world. Investors will keep an eye on the first reading of the Indian HSBC Purchasing Managers Index (PMI) on Friday. Also, the US S&P Global PMI reports for June will be released. 

Foreign investors have sold a net of US$2.6 billions of local equities so far this calendar year, while US Dollar inflows into the debt markets have been strong at US$7.5 billion ahead of India’s inclusion in the JPMorgan Emerging Market bond index.

Foreign inflows into Indian bonds could reach a decade-high of $2 billion around June 28, when they will be included in a widely-tracked JPMorgan index, although the RBI will lap up most of the USD to avoid the volatility in the INR, bankers said. 

The preliminary India’s HSBC Services PMI is expected to drop to 60.0 in June from 60.2 in May. 

US citizens who applied for unemployment insurance benefits increased by 238K in the week ending June 15. This figure was lower than the previous weekly gain of 243K and below the market consensus of 235K. 

US Building Permits declined by 3.6% MoM in May from 1.44 million to 1.386 million, while Housing Starts for the same period dropped by 5.5% from 1.352 million to 1.277 million.

Fed Bank of Richmond President Tom Barkin said on Thursday that the central bank is well-positioned with the necessary firepower for the job, but will learn a lot more over the next several months.  

MAJOR WORLD CURRENCIES:

EUR/USD fell back to familiar technical levels on Thursday, clunking down to the 1.0700 handle after a miss in US economic figures bolstered the Greenback. Friday markets loom ahead with a packed data docket, with Purchasing Managers Index (PMI) figures for both the EU and the US on the cards.

Forex today: All the looks will be on PMI reports

In May, Germany's Producer Price Index (PPI) fell to 0.0% on a month-over-month basis, down from the previous 0.2% and missing the expected increase to 0.3%. On a year-over-year basis, the PPI also came in below expectations, declining to -2.2% for the year ending in May. Although the annual figure improved from the previous -3.3%, it still fell short of the forecasted recovery to -2.0%.

Read more: US Initial Jobless Claims rose more than estimated last week

The latest US Initial Jobless Claims numbers came in higher than expected, with 238,000 people filing for unemployment benefits in the week ending June 14, compared to the revised previous week's figure of 243,000. This increase also pushed the four-week average up to 242,750 from the previous 227,250.

The Philadelphia Fed Manufacturing Survey for June dropped to 1.3 from 4.5, falling short of the expected 5.0. Additionally, US Housing Starts decreased to 1.277 million new residential construction projects in May, lower than the forecast of 1.37 million and the revised previous month's figure of 1.352 million.

Coming up on Friday: EU & US PMI prints to close out the week

Friday’s pan-EU HCOB Purchasing Managers Index (PMI) activity surveys for June are expected to recover slightly. The EU’s June Manufacturing PMI is expected to move to 47.9 from 47.3, while the Services PMI component is forecast to rise to 53.5 from 53.2.

On the US side, Manufacturing and Services PMIs are both forecast to tick lower, with Manufacturing expected to slip to 51.0 from 51.3 and Services sliding to 53.7 from 54.8.

GBP/USD:

GBP/USD is poised for a bumper Friday session. Key UK data is due during the European market session, and US Purchasing Managers Index (PMI) activity surveys set to wrap up the trading week. The Bank of England (BoE) held rates at 5.25% this week, with a stubbornly tepid stance on rate cuts that deflated broad-market rate cut expectations.

Forex Today: All the looks will be on PMI reports

The BoE was widely expected to keep interest rates unchanged in June. However, there was a focus on recent services inflation and a vague aim to keep inflation "sustainably" lower, which has left the value of the Sterling uncertain. Additionally, the BoE expressed a willingness to maintain restrictive policies for as long as necessary and emphasized that although the UK labor market is looser than before, it still remains historically tight.

BoE maintains policy rate at 5.25% as forecast

A miss in US economic figures softened investor risk appetite on Thursday, headlined by a worse-than-expected print in US Initial Jobless Claims coming in higher than expected for the week ended June 14. Week-on-week unemployment claimants are still lower, printing at 238K versus the previous 243K (revised from 242K), but still came in above the four-week trending average of 242.75K, which itself also rose from the previous 227.25K.

After the BoE voted seven-to-two to keep interest rates on hold at 5.25%, GBP traders will now focus on Friday's upcoming economic data. The scheduled releases include UK Retail Sales and updated S&P Global PMI figures for both the UK and the US. UK retail sales are expected to rebound to 1.5% MoM in May, compared to the previous decline of -2.3%. Additionally, UK PMIs are forecasted to show slight improvements. The Manufacturing PMI is expected to increase to 51.3 from 51.2, and the Services component is anticipated to rise to 53.0 from 52.9.

US Manufacturing and Services PMIs are both forecast to tick lower, with Manufacturing expected to slip to 51.0 from 51.3 and Services sliding to 53.7 from 54.8.

Gold

Gold price (XAU/USD) oscillates in a range during the Asian session on Friday and consolidates the previous day's strong move up to a two-week high, around the $2,360-2,365 area. The near-term bias, meanwhile, seems tilted in favor of bulls amid the case for interest rate cuts from the Federal Reserve (Fed) this year. The expectations were reaffirmed by softer US economic data released on Thursday, which added to the recent signs of a slowing economy. This, along with a convincing breakout through the 50-day Simple Moving Average (SMA), favors bullish traders and suggests that the path of least resistance for the commodity is to the upside. 

Meanwhile, the Bank of England's (BoE) dovish outlook on Thursday lifted bets for an interest rate cut in August. Furthermore, the European Central Bank's (ECB) decision to start cutting interest rates earlier this month and the Swiss National Bank's (SNB) second rate cut of 2024 on Thursday further validate the near-term positive outlook for the non-yielding Gold price. That said, an uptick in the US Treasury bond yields and the underlying bullish tone across the global equity markets turn out to be key factors acting as a headwind for the safe-haven precious metal. Nevertheless, the XAU/USD remains on track to register gains for the second straight week. 

1.     

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

(Updated as on 21^th June 2024, @ 09.00am)

 Cash/Tom:  0.25/1.75                   Cash/Spot:0.35/2.50

 Tom/Spot:  0.10/0.75                    Spot/Next: 0.10/0.80

Cash Date:  21.06.2024

Tom Date:    24.06.2024

Spot Date:    25.06.2024

Outlook for the day 21^th June, 2024

Rupee expected to trade in range of 83.55-83.70

MAJOR WORLD CURRENCIES: as on (20^th June, 2024)

Foreign Currencies

Updated: 17:30 hrs. (12:00 GMT) on 20^th June, 2024

Precious Metals

Updated: 17:30 hrs. (12:00 GMT) as on 19^th June, 2024

Stock Indices

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