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Rupee Outlook and Strategy

* US dollar rallied yesterday on the back of upbeat economic data from US and a surge in US treasury yields. Yields rose as improved services PMI data and solid job reports reinforced expectations the Fed will continue to raise interest rates well into 2023. ISM nonmanufacturing PMI rose to 56.5 last month from 54.4 in October 2022

* Rupee future maturing on December 28 depreciated by 0.65% yesterday amid muted domestic market sentiments, a surge in crude oil prices and FII outflows

* The rupee is likely to depreciate today as the dollar rebounded from six month’s low. The dollar is gaining strength as upbeat economic data from the US fuelled expectation among investors that peak for Fed funds will be higher than expected. Further, risk aversion in global markets and FII outflows may hurt the rupee. A sharp fall in rupee may be prevented on softening crude oil prices. US$INR (December) may trade in a range of 81.75-82.25

Euro and Pound Outlook

* The Euro slipped yesterday mainly on the back of strong dollar and risk aversion in global markets. Additionally, disappointing economic data from euro area added downside pressure on single currency. Europe final services PMI data showed that activity in the sector contracted for a third consecutive month. Retail sales declined 1.8% in October 2022 compared to 0.8% rise in September 2022

* The Euro is expected to trade with a negative bias amid strong dollar and pessimistic global markets sentiments. Further, long awaited EU embargo on imports of Russian oil and oil products came into force. Additionally, disappointing economic data from Euro Area will hurt single currency. The EURUSD is facing resistance near 1.0550 levels. As long as it sustains below this level, the EURUSD may slip back to 1.0450 levels. EURINR (December) is expected to trade in a range of 86.00-86.65

* The pound depreciated yesterday mainly on the back of a strong dollar. Further, the sterling slipped on pessimistic global market sentiments and disappointing economic data. UK final Services PMI data displayed that activity in the sector contracted for a second consecutive month

* The pound is expected to trade with a negative bias mainly on the back of strong dollar and risk aversion in global markets. Further, the pound may slip on expectations of disappointing economic data. Construction PMI data is likely to show that activity in the sector slowed down. Moreover, the sterling may slide as households and business face a cost of living crisis. GBPUSD is facing strong resistance near 1.2300 level. As long as it sustains below this level the pound may slip back to 1.2100 levels. GBPINR (December) is expected to trade in a range of 99.80-100.50

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