Rupee Opens Flat After Upbeat US Data; Fed In Focus

Rupee Opens Flat After Upbeat US Data; Fed In Focus

17 Jun 2019 09:10 AM

USD/INR – The Indian rupee opened flat against the dollar following better-than-expected U.S. retail sales data, which prompted the dollar index’s biggest jump in three months. The rupee opened flat at 69.80 to a dollar compared with its previous close. The dollar index posted its biggest advance in three months on Friday after headline U.S. retail sales rose 0.5% month-on-month in May and April sales were revised higher. Control sales, a subset of the retail sales that is considered a close proxy for spending, topped estimates. The data comes ahead of a two-day meeting of the Fed that begins tomorrow. Amid worries over the U.S. economic outlook on account of mounting trade uncertainties, expectations are of the U.S. central bank striking a dovish tone. Meanwhile, data released late Friday showed India’s trade gap widened to a 6-month high of $15.36 billion. The deficit was slightly lower than the $15.74 billion estimate.

EUR/USD –    The euro was little changed at $1.1216 after shedding about 0.6% on Friday, when it fell to an eight-day trough of $1.1203. Some of those EUR longs probably viewed the EUR/USD rise over the most recent reporting period as an opportunity to reduce those positions. True, the Fed could be edging toward a round of rate cuts, which should weaken the dollar. However, the near-term rate view also shows a slight reduction in Euribor rates. Even though the market foresees deeper cuts in the U.S. than in Europe, to the detriment of the dollar, today's U.S. retail sales beat has reduced Fed easing odds, which is USD-positive. Further, Euribor rates hint at euro zone rates remaining negative until Q2 2023, when markets project U.S. rates to stand at 1.85% even after dropping from current levels by 2.40%.

GBP/USD – The British pound was trading little changed at $1.2595 after falling on Friday as investors trimmed their positions after Brexiteer Boris Johnson moved closer to becoming the next prime minister. Sterling has fallen in recent weeks as the contest to succeed Prime Minister Theresa May heats up. Investors are concerned that May's successor will lead Britain out of the European Union with no deal in place on their future trading relations. They are also worried about how little time whoever takes over will have to try to renegotiate May's withdrawal agreement with Brussels. The EU says the deal is not up for renegotiation before Britain is scheduled to exit on Oct. 31.

USD/JPY – The dollar was flat at 108.63 yen after edging up 0.15% on Friday. If Friday's apparently good U.S. economic news slows the Fed's transition toward easing at FOMC or emboldens Trump to expand Chinese import tariffs, then stocks could come under renewed pressure, which would add to support for the haven yen. It rallied with U.S. rates on well-above-forecast net April-May U.S. retail sales and a bigger-than-expected rebound in industrial production, as this data will drag Q2 GDP forecasts higher and diminish concerns about the U.S.-China trade war damaging the U.S. expansion.  USD/JPY held Thursday's 108.16 low after digesting weak China data and ongoing fears the U.S. and China are bracing for a prolonged protectionist battle. Trump said this morning it doesn't matter if Xi comes to the G-20, China will eventually make a trade deal.

Currency Range for today

Currency Pair Lower Upper
USD/INR 69.60 70.10
EUR/INR 77.90 78.70
GBP/INR 87.70 88.50
JPY/INR 0.6400 0.6460

Important data releases today

Time Ccy Event Forecast Previous
5:30 PM INR Current Account (USD) (Q1) - -16.90B

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