WEEKLY SYNOPSIS: 11/12/2020
|Currency Pairs||WEEKLY CLOSE||PRIOR WEEK CLOSE||% change|
Brent Crude closed at USD 50VS prior week close of USD 48.98. Gold closed at USD 1843.
Nifty closed at 13513 vs prior week close of 13258.
10 Year G-SEC Yield closed at 5.95%.
Major developments: USDINR traded in the 73.51-73.96 range and closed at 73.65as against prior week close of 73.78, gainof 0.17% for Rupee w/w. EUR declined 0.17% and GBP declined 1.76% against Rupee. Indian benchmark Equity indices climbed 1.76% w/w basis. 10 Year G-SEC Yield closed at 5.95%.
Rupee was stuck in a small trading range, buffeted between strong inflows and USD accumulation by RBI. Equity markets rallied further notwithstanding rich valuation levels.
Indian OCT IIP climbed 3.6% and manufacturing sector climbed 3.5%. IIP declined 6.6% in Oct 2019. IIP has contracted 17.5% in this fiscal till Oct. Power sector climbed 11.2%, mining contracted 1.5%, capital goods climbed 3.3%, consumer durables grew 17.6% and non durables grew by 7.5%. Growth momentum is picking up and flows remain robust supporting Indian Equity market rally.
FII’S nett bought Rs 24250 Cr ofIndian Equities in Dec . FII’S nett bought Rs 1976 Cr of Indian debt securities in Dec . In this financial year, FII’S have nett bought Rs 183160 Cr of Equities and have sold Rs 29790 Cr in debt. In FY 19-20, FII’s sold Rs 10200 Cr of Equities and 47393 cr of debt.
Global developments:Global market developments were dominated by vaccine, US stimulus details and Brexit talks.
ECB expanded and extended the pandemic emergency fund.The envelop of the pandemic emergency purchase programme (PEPP) is raised by EUR 500B to a total of EUR 1850B. The program will also be extended to “at least the end of March 2022”.ECB left main refinancing rate unchanged at 0.00% as widely expected. Marginal lending rate and deposit rate are held at 0.25% and -0.50% respectively. The asset purchase programme (APP) purchase will continue at a monthly pace of EUR 20B.
UK GDP grew 0.4% mom in October, slightly below expectation of 0.5% mom.
Eurozone Q3 GDP growth was revised down slightly by -0.1% qoq to 12.5% qoq. GDP dropped -4.3% yoy.JapaneseQ3 GDP growth was finalized at 5.3% qoq, revised up from 5.0% qoq.
EU and German ZEW Indicator of Economic Sentiment increased significantly in December despite the still high numbers of new coronavirus infections. This is most likely due to the announced forthcoming COVID-19 vaccine approvals,” according to survey officials.
Fed is meeting this week. BOE and BOJ are other important events for this week. While not much is expected from BOE and BOJ, Fed could set the base for futher monetary stimulus.
If FED adopts a very dovish forward guidance by extending the asset purchase duration, USD could go into another wave of selling.
Pound movement will depend on brexit talks. If the final round of talks fail, UK PM could pull out UK from EU without a deal and set the stage for a chaotic process.
Important developments in coming week: FED, BOE and BOJ meets.
Currency range forecast: USDINR:73.45(support)-73.95/74.40(Resistance), EURINR: 88.60/87.60(support), GBPINR: 95.50(support) 99- Resistance, JPYINR: 69-72.
Suggestion: Cover USD import payables on decline to 73.55/73.45. USD receivables can be hedged at 74.30+.EURINR payables can be hedged on decline to 88.60/87.60. GBPINR receivables hedging can be done.
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