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%.

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