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Rupee Outlook and Strategy

• The US dollar index climbed to a two-week high on Thursday as the US economy grew by an annualized 2% in Q1 2023, well above 1.3% in the second estimate and forecasts of 1.4%. Consumer spending growth accelerated more than expected to 4.2%, the strongest in nearly two years v/s 3.8% in the second estimate despite stubbornly high inflation. Further, dollar was supported on sharp rise in US treasury yields across curve

• The rupee future maturing on July appreciated marginally by 0.03% on Wednesday amid uptick in US dollar and rise in crude oil prices

• The rupee is likely to depreciate today amid strong US dollar and rising crude oil prices. Dollar is gaining strength as upbeat economic data from US is providing room for US Fed to hike rates further and keep them elevated for longer period than expected. Meanwhile, investors will closely watch core PCE price index data from the US. US$INR is likely to break the level of 82.20 to continue its upward trend towards the level of 82.30

Euro and Pound Outlook

• The Euro dropped by almost 0.50% on Thursday amid strong US dollar. However, further downside was restricted as the German consumer price inflation increased to 6.4% YoY in June 2023, rising from the 14-month low of 6.1% recorded in May and slightly exceeding market expectations of 6.3%, raising expectations that the ECB will continue to increase interest rates

• The Euro is likely to trade with a negative bias for the day amid strength in the US dollar. Further, traders will closely monitor series of key economic data from the Euro area like CPI YoY data, which is expected to drop from 6.1% to 5.6% but remained much above the central bank target. EURUSD is likely to break the level of 1.0840 to continue its downward trend towards the level of 1.0800. EURINR is likely to drop towards the level of 89.00

• The pound edged lower by nearly 0.20% yesterday as markets turned nervous about the impact of rate hikes on the British economy. However, sharp decline was restricted on rise in UK 10 year bond yields

• The pound is expected to trade with a negative bias amid strong US dollar. Further, pound may be pressurised on expectations of weak economic data from the Britain. The pair is expected to break the level of 1.2600 and continue its downward trend towards the level of 1.2560. GBPINR is likely to trade in downward trend towards the level of 103.40

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