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Rupee Outlook and Strategy

* US dollar index tumbled to its two weeks low amid a sharp jump in US weekly jobless claims numbers. Jobless claims hit a 19-month high last week and knocked treasury yields lower. Two year treasury yields fell to 4.5%. Also, anticipation of the Fed pausing its rate hike path in next week’s FOMC meeting weighed on the dollar

* The rupee maturing on June 27 depreciated by 0.03% on Thursday after the RBI left rates unchanged for a second time in a row

* The rupee is likely to gain amid weakness in the dollar. Data from US showed the labour market was slowing, bolstering expectations that US Fed may pause rate hikes in its meeting next week. As per CME FedWatch toll, the market is pricing a 75% chance of Fed hitting the pause button in upcoming meeting. US$INR is expected to face a hurdle near 82.70 and move back towards 82.30. Only a close below 82.30 would weaken the pair towards 82.10

Euro and Pound Outlook

* The Euro marked its best day in the last two weeks and jumped more than 0.75% amid weakness in dollar. Further, expectation of a 25 bps hike in the next ECB meeting has supported the pair to go past 1.0780. Meanwhile, the drop in revised GDP numbers to -0.1% QoQ from previously reported unchanged QoQ has checked its gains

* The Euro is likely to extend its rise amid weakness in the dollar. Further, divergence in the monetary policy would also support the pair. The Euro is expected to hold support of 20 day EMA near 1.0730 and move towards 1.0820. EURINR is likely to hold the support near 88.50 and move back towards 89.30

* The pound gained almost 1% on Thursday amid weakness in the dollar and increase in probability of rate hike in next policy. The forecast of higher inflation in Britain by OECD has fuelled the probability of more rate hikes in the region. The British two-year government bond yields hit on Thursday their highest level since last September

* The pound is expected to stay firm amid weakness in the dollar. Further, expectation of a 25 bps hike in the next BoE policy would also support the pair. The pair is expected to rise towards 1.260 as long as it holds above the 20 day EMA at 1.2460. GBPINR is likely to hold the support of 102.80 and move higher towards 103.70

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