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Rupee Outlook and Strategy

• The US dollar slipped yesterday on the back of a decline in US treasury yields and rise in risk appetite in global markets. Yields tumbled after CPI data from the US showed inflation eased in November reinforcing expectations that the Fed will slow down the pace of rate hike. US CPI increased by 7.1% in November 2022 compared to 7.7% in October 2022

• Rupee future maturing on December 28 depreciated by 0.37% yesterday tracking a firm dollar and surge in crude oil prices. Further, the rupee declined on persistent dollar demand from importers

• The rupee is likely to appreciate today on the back of weakness in dollar and optimistic global markets sentiments. Market sentiments improved in anticipation that the Fed could slow its plan for tightening financial conditions due to easing inflation. Meanwhile, a surge in crude oil prices will hurt the rupee. US$INR (December) is expected to trade in a range of 82.30-82.80

Euro and Pound Outlook

• The Euro rallied by 0.89% yesterday amid a strong dollar and rise in risk appetite in global markets. Further, Euro edged up on better-than-expected economic data from eurozone. German investor sentiment recovered as inflation expectations dropped and Europe’s biggest economy was so far successful in avoiding acute shortage in energy supplies

• The Euro is expected to trade with a positive bias mainly on the back of a weak dollar and optimistic global markets sentiments. Meanwhile, expectation of disappointing economic data from euro area will hurt the single currency. Industrial production is likely to decline by 1.4% in October 2022 compared to 0.9% rise in September 2022. Additionally, investors will remain cautious ahead of ECB monetary policy, where the central bank is likely to hike rates by 50 bps. More focus will be on statements to get cues on future monetary policy stance. EURUSD is taking support near 1.0580 levels. As long as it sustains above this level, it may rally to 1.0700 levels. EURINR (December) is expected to trade in a range of 87.20- 87.80

• The pound rose yesterday by 0.82% on the back of weakness in the dollar and rise in risk appetite in global markets. Further, better-than-expected economic data from Britain supported the sterling. Unemployment rate came in line with expectations and wage growth rose stronger than expected at 6.1%, the biggest gain since records began in 2001 excluding jumps during pandemic

• The pound is expected to trade with a positive bias mainly on the back of a weak dollar and optimistic global market sentiments. Further, the market will keep an eye on inflation data from Britain, which is likely to ease in November. Meanwhile, investors will remain vigilant ahead of BoE’s monetary policy, where the central bank is likely to increase interest rate by 50 bps. GBPUSD is likely to rise till 1.2450. As long as it sustains above 1.2300 level. GBPINR (December) is expected to trade in a range of 101.50-102.10

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