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Currency Outlook

Rupee Outlook

• Rupee extended its gain for the sixth day in a row amid strong inflow of funds into the domestic market and weakness in oil prices. Dollar inflows helped the rupee to hit its highest level since December 15.

• Rupee is likely to appreciate further amid strong domestic inflows and softness in the dollar. Further, cooling US inflation numbers would push the Federal reserve to cut the interest rates in March 2024. The US core prices are expected to increase by 3.8% against November reading of 4%, indicting more evidence of easing inflation. The CME Fed-Watch tool suggests more than 64% probability of 25 bps rate cut in March. USDINR may face the hurdle near 83.20 and move lower towards 82.90. A move below 82.90 would open the doors towards 82.80 mark.

Euro and Pound Outlook

• Euro gained yesterday largely due to weakness in the dollar. Further improved economic numbers from the Euro zone and hawkish comments from ECB members pushed the bond yields higher. The rate cut probability in the next meeting still holds below 5% suggesting ECB to keep rates higher in the first half of 2024. For today, EURUSD is likely to move higher towards 1.1010 levels as long as it stays above 1.0950 amid weak dollar and improved risk sentiments. EURINR is likely to rise towards 91.50 as long as it holds above 90.80 levels

• Pound is expected to hold its gains and move towards 1.2790 amid weak dollar. Further, BOE Gov Bailey’s stance to bring back the inflation back to target 2% would also support the pair to trade above 1.27. GBPINR is likely to rise towards 106.10, as long as it holds above 105.50 level.

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