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Rupee Outlook and Strategy

* The US dollar slipped by 0.4% yesterday after US FOMC meeting minutes failed to provide any new information about the size of its expected rate hike in the upcoming meeting. As per CME Fedwatch tool, probability of a 25 bps rate hike in the February meeting is 69.7%. Further, ISM manufacturing PMI data showed activity in the sector contracted for a second consecutive month

* Rupee future maturing on January 27 appreciated by 0.23% tracking weakness in the dollar and sharp decline in crude oil prices. However, sharp gains were prevented on risk aversion in domestic markets

* The rupee is likely to appreciate today amid a weak dollar and softening of crude oil prices. Further, optimistic global market sentiments may support the currency pair. Meanwhile, sharp gains may be prevented as investors are wary ahead of major economic data from the US. US job data is likely to show that labour market remained tight. US$INR (January) is facing strong resistance near 83.10 levels. As long as it sustains below this level it may slip back to 82.50 levels

Euro and Pound Outlook

* The Euro appreciated by 0.52% yesterday amid weakness in the dollar and rise in risk appetite in global markets. However, sharp upside was capped as CPI data from France, Germany and Spain showed that price pressure eased. Softer inflation led to speculation that the central bank may reduce the magnitude of rate hikes and may even pause it sooner than anticipated

* The Euro is expected to trade with a positive bias mainly on a weak dollar and optimistic global market sentiments. Additionally, expectation of improved economic data from the euro area may support the single currency. EURUSD is holding support near 1.0560 levels. As long as it sustains above this level it may rise till 1.0700 levels. EURINR (January) is expected to trade in a range of 87.85-88.40

* The pound appreciated by 0.73% yesterday amid a weak dollar and rise in risk appetite in global markets. However, sharp upside was capped on disappointing economic numbers. Data showed Britain’s housing market slowed. British lenders approved 46075 mortgages in November down from 57875 in October, the lowest level since June 2020

* The pound is expected to trade with a positive bias amid weakness in the dollar and rise in risk appetite in global markets. Meanwhile, expectation of disappointing economic data from Britain may cap sharp upside. GBPUSD is likely to rise till 1.2130 level as long as it sustains above 1.1960 level. GBPINR (January) is expected to trade in a range of 99.50-100.40

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