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Rupee Outlook and Strategy

• The US dollar rallied by 0.84% yesterday after ADP non-farm employment data showed more than expected number of jobs were added in the economy. Even the number of people filing for jobless claims dropped to a three-month low last week. Strong labour market data supported prospects that Fed may keep rates higher for some time

• Rupee future maturing on January 27 appreciated by 0.44% mainly on the back of softening of crude oil prices. A decline in crude oil prices will lower import bills and even ease concerns over India’s CAD

• The rupee is likely to depreciate today amid strong dollar and risk aversion in global markets. Market sentiments were hurt as strong labour market data reinforced expectations that the Fed may keep rates higher for some time. Also, investors will closely watch non-farm payrolls, average hourly earnings and ISM Services PMI data to gauge the economic health of the country. US$INR (January) may hold support near 82.45. As long as its sustains above this level, it may rise back to 82.80 levels

Euro and Pound Outlook

• The Euro depreciated by 0.75% yesterday, mainly on the back of a rebound in dollar and pessimistic global market sentiments. Market sentiments were hurt as strong labour market data reinforced expectations that the Fed may keep rates higher for some time. Further, FOMC meeting minutes had also shown that none of the Fed members expect a rate cut in 2023

• The Euro is expected to trade with a negative bias amid a strong dollar and risk aversion in global markets. Further, German factory orders are expected to decline by 0.5% in November 2022 compared to 0.8% rise in October 2022. Additionally, inflation data from the euro area is likely to show that price pressure is ebbing. Softer inflation may fuel expectations that the central bank may reduce the pace of rate hikes and could even pause it sooner than anticipated. EURUSD is facing resistance near 1.0640 levels. As long as it sustains below this level, it may slip till 1.0450 levels. EURINR (January) is expected to trade in a range of 87.00-87.70

• The pound depreciated by 1.25% yesterday amid a bounce back in the dollar and risk aversion in global markets. Further, disappointing economic data from the country added downward pressure. UK Services PMI data showed activity in the sector contracted for a third consecutive month

• The pound is expected to trade with a negative bias mainly on the back of a strong dollar and weak global market sentiments. Further, expectations of unsatisfactory economic data from Britain will hurt the sterling. GBPUSD is likely to slip back to 1.1820 level as long as it sustains above 1.2000 level. GBPINR (January) is expected to trade in a range of 98.40-99.20

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