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Rupee Outlook and Strategy

• The US dollar declined further on Friday amid expectations that the US Fed will slow the pace of interest rate hikes. However, sharp downside was prevented as the Chicago PMI in the US increased to 44.9 points in December 2022, recovering slightly from a 30-month low of 37.20 points hit in November. Additionally, an uptick in US 10 year’s treasury yields supported the dollar

• Rupee future maturing on January 27 appreciated by 0.14% amid weakness in the dollar. However, a decline in forex reserves from $563.50 billion to $562.81 billion limited gains

• The rupee is likely to appreciate today primarily on the back of a weaker dollar. Moreover, expectations that the country's current account deficit had likely peaked may help the rupee. On the other hand, a rise in crude oil prices may pressurise the rupee. US$INR (January) may trade in a range of 82.70-82.93 for the day

Euro and Pound Outlook

• The Euro appreciated by 0.36% on Friday amid weakness in the dollar and a sharp rise in German 10 year’s bond yields. Further, the Euro was supported as the annual inflation rate in Spain fell to 5.8% in December 2022 from 6.8% in the previous month, the lowest since November 2021

• The Euro is expected to trade with a positive bias for the day amid a softer dollar and rise in German 10 years bond yields. Further, the Euro may be supported as ECB President Christine Lagarde said eurozone wages are growing quicker than earlier thought and the European Central Bank must prevent this from adding to already high inflation. EURUSD is likely to surpass the key resistance level of 1.0736 to continue its upward trend towards 1.0770. EURINR (January) is expected to trade in an upward trend towards 88.85 level

• The pound appreciated by almost 0.30% on Friday amid weakness in the dollar and continued rise in UK 10 year’s bond yields. Further, the pound was supported as the nationwide house price index in the UK increased 2.8% YoY in December 2022, compared to market expectations of 2.3%

• The pound is expected to trade with a positive bias for the day on the back of a soft dollar and rise in UK 10 years bonds yields. GBPUSD is likely break the key resistance level of 1.2130 to trade in an upward trend towards the level of 1.2160. GBPINR (January) is expected to trade in a range of 99.60 to 100.10

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