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Rupee Outlook and Strategy

* The US dollar advanced on Thursday amid stronger-than-expected economic data from the US. Producer price index increased 0.7% MoM in January 2023, the most in seven months and higher than market forecasts of 0.4%. This raised expectations that the Federal Reserve would have to maintain its elevated interest rate higher for longer. Further, the dollar was supported on rising US 10 years treasury yields

* The rupee future maturing on February 24 appreciated by 0.20% amid FII inflows in domestic equity markets

* The rupee is expected to depreciate today amid stronger dollar. Further, higher-than-expected CPI and job data may prompt US Federal Reserve to hike rates multiple times and keep it higher for longer than anticipated. Meanwhile, FII inflows in domestic equity markets and improved economic data may prevent sharp weakness in rupee. The US$INR is likely to trade towards the level of 82.90 for the day

Euro and Pound Outlook

* The Euro continued to fall as the ECB board member Fabio Panetta said the European Central Bank should start raising its interest rates in smaller increments and avoid committing to future moves as inflation in the eurozone falls. Further, the Euro slipped after Greek central bank chief Yannis Stournaras suggested that interest rates may not have to be raised to a level that pushes the bloc into recession

* We expect the Euro to trade with a negative bias for the day amid a stronger dollar and dovish comments from the ECB board members. Further, traders will closely watch German PPI data, which is expected to drop from -0.40% to -1.60% as it may raise expectations that the ECB may slow its tightening path soon. EURUSD is likely to break the key support level of 1.0650 to continue its downward trend towards the level of 1.0610. EURINR (February) is expected to continue its downward trend towards the level of 88.30

* The pound depreciated almost 0.30% on Thursday amid strong dollar and as Britain's softer-than-expected inflation eased tightening pressures from the Bank of England. Meanwhile, further downside was prevented on uptick in UK 10 years bond yields

*  The pound is expected to trade with a negative bias for the day amid a strong dollar and expectations that the BoE may soon end its interest rate hiking cycle. Meanwhile, market participants will closely watch retail sales data from the UK, which is expected to improve from -1.00% to -0.30%. GBPINR (February) is likely to break the key support level of 99.50 to continue its downward trend towards the level of 99.30

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