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Rupee Outlook and Strategy

• The US dollar index edged higher by almost 0.50% on Friday amid risk aversion in the global markets and hawkish comments from Fed officials. Meanwhile, further upside was restricted as US manufacturing PMI fell to 46.3 in June 2023, pointing to the biggest contraction in the manufacturing sector since December, compared to 48.4 in May and forecasts of 48.5

• The rupee future maturing on June depreciated marginally by 0.03% on Friday amid strong US dollar and sharp drop in domestic equity markets

• The rupee is likely to appreciate today amid weak dollar and softening of crude oil prices. However, sharp gains may be prevented on concerns that elevated borrowing cost across the major countries in the globe will hamper economic growth. US$INR is likely to face hurdle near 82.15 levels and slip back to 81.85 level

Euro and Pound Outlook

• The Euro edged lower by 0.60% on Friday amid strong US dollar. Further, euro fell as the manufacturing PMI for Germany sank to 41 in June 2023 from 43.2 in the previous month, missing market expectations of 43.5 and the 11th consecutive contraction for German manufacturing and the sharpest in three years, as higher interest rates by the ECB continued to negatively impact the sector

• The Euro is likely to trade with a positive bias for the day amid weakness in dollar. However, sharp upside may be capped on expectations of weak German Ifo business climate index data. EURUSD is likely to take support near 1.0860 levels and rise back till 1.0940 level.EURINR is likely to move north towards the level of 89.65

• The pound dropped by almost 0.30% on Friday on rising expectations the UK economy could slip into recession after the Bank of England delivered an outsized rate hike in response to persistent inflation. Further, pound came under pressure as the UK manufacturing PMI dropped to 46.2 in June 2023, down from 47.1 in the previous month and below market expectations of 46.8. The report indicated a further contraction in output levels, accompanied by a sharp decline in new orders

• The pound is expected to trade with a negative bias as fresh economic data from Britain showed signs of economic slowdown. Additionally, investors fear that UK economy could slip into recession after BOE went for enormous rate hike. The pair is expected to drop towards the level of 1.2660, as long as it sustains below the level of 1.2745. GBPINR is likely to trade in downward trend towards the level of 103.95

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