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Rupee Outlook and Strategy

• The US dollar ended on a positive note yesterday as demand for safe haven increased on worries about slowing global economic growth while US holiday limited volatility

• Rupee future maturing on July 27 appreciated marginally by 0.02% yesterday amid a weak dollar and rise in risk appetite in global markets. Meanwhile, a surge in crude oil prices and persistent FII outflows prevented further gains

• The rupee is expected to appreciate today amid optimistic global market sentiments. Market sentiments improved on reports that US President Biden is expected to roll back some tariffs on Chinese imports in attempt to dampen elevated inflation. However, sharp gains may be prevented on elevated crude oil prices and consistent FII outflows. Additionally, investors fear that major central banks attempt to counter inflation by raising interest rates may lead economies into recession. US$INR (July) is expected to trade in a range of 78.90-79.30

Dollar Index Vs US$INR

Euro and Pound Outlook

• The Euro appreciated 0.04% yesterday amid a rise in risk appetite in global markets. Reports that the White House will announce an easing of some Chinese tariffs later this week helped to inject some optimism back into market. Further, elevated inflation made a strong case for ECB to raise interest rates in upcoming meeting. However, sharp upside was capped on disappointing economic data from Euro Area

• The Euro is expected to trade negative amid strong dollar and fears of global recession. Further, investors fear that eurozone economy has not fully recovered from pandemic and is facing threats from ongoing war between Russia and Ukraine. At such a fragile time rising borrowing cost to combat soaring inflation may have a severe effect on the economy. Additionally, market participants will take cues from economic data from euro area. EURINR (July) is expected to trade in a range of 82.40-82.85

• The pound appreciated by 0.17% yesterday on rise in risk appetite in the global markets. Further, the market focused on any signals that BoE could raise interest rates faster that anticipated. Market participants expect a bigger increase of 50 bps at the next meeting. However, sharp upside was capped on Brexit related risk in relation to a possible partial suspension of Norther Ireland protocol

• The pound is expected to trade with negative bias on strong dollar and Brexit related risk. Germany and Ireland told Britain there was no legal or political justification for PM Boris Johnson’s plan to override parts of Brexit deal governing trade with Northern Ireland. Further, the sterling may slip on signs of a weakening economy. Investors will remain cautious ahead of BoE’s financial stability report and FPC meeting minutes. GBPINR (July) is expected to trade in a range of 95.70-96.30

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