WEEKLY SYNOPSIS: 08/05/2020
|Currency Pairs||WEEKLY CLOSE||PRIOR WEEK CLOSE||% change|
Brent Crude closed at USD 28VS prior week close of USD 23.55.
Nifty closed at 9251 vs prior week close of 9859.
10 Year G-SEC Yield closed at 5.97%.
Major developments:USDINR traded in the 75.26-75.80 range and closed at 75.55. EUR and GBP declined against Rupee. Indian Equity markets declined 6.16% w/w basis. 10 Year G-SEC Yield plunged below 6%.
There were no major data releases. IIP and CPI are the key data releases in the coming week. Indian Equity indices declined on reports of increasing banking sector stress. Reliance held the market as more investments poured in.
USDINR pair may have made a top at 76.90. Increasing Dollar liquidity and beginning of economic activity in May/June are positives for Rupee. However, US verbal duel with China and likely imposition of tariffs could swing the Rupee back into weakness mode.
Global developments:USAand EU economic data confirmed the worst fear. US payrolls data showed that 20.5 mn lost their jobs and unemployment rate hit 14.7%, highest since WW II. Job gains made since 2011 has been erased in one month and it is back to pre-2011 levels. However, markets are over optimistic as they expect Govt incentives to start having impact by next month and firms would be encouraged to hire back people.
EU GDP is projected to contract -7.4% in 2020, then rebound by 6.1% in 2021. Inflation would drop to 0.6% in 2020, then climb back to 1.3% in 2021. Unemployment rate would surge to 9.0% in 2020, then fall back to 7.9% in 2021.
BoE kept interest rate unchanged at 0.10% as widely expected, with unanimous vote. Asset purchase target was held at GBP 645B, but by 7-2 vote.
Important developments in coming week:Indian IIP, CPI and US CPI and retail sales.
Currency range forecast for coming week:
USDINR:74.90(support), EURINR: 81.50(support), GBPINR: 92.50(support), JPYINR: 66.50-71.
Suggestion: Cover USD import payables on decline to 75.30/74.90.USD receivables can be hedged at 76.10/76.40+.1 M EURINR payables can be hedged at 82/81.75. EURINR receivables can be hedged closer to 83.50/84. GBPINR receivables hedging can be done on any rally to 94/94.50.