Rupee Opens Flat As Oil Slump Offsets Dollar Index Jump

Rupee Opens Flat As Oil Slump Offsets Dollar Index Jump

17 Jul 2019 09:16 AM

USD/INR – The Indian rupee opened flat against the dollar after the biggest decline in Brent crude in two weeks overshadowed a surge in dollar index on upbeat U.S. economic data. The rupee opened at 69.71 per dollar in early trades compared with its previous close of 68.71. Most Asian currencies slipped Wednesday after the dollar index climbed 0.5% following buoyant U.S. economic data. Retail sales in June grew 0.4% month-on-month, significantly better than the 0.1% increase expected. Control retail sales too trumped estimates, growing 0.7%, more than double of what was expected. There was more good news for the U.S. economy. Manufacturing output growth in June was twice the pace of forecasts on a month-on-month basis.

EUR/USD – The euro was steady at $1.1212 after losing more than 0.4% the previous day. The losses came after a survey by the ZEW institute showed that the mood among German investors deteriorated more sharply than expected in July amid an unresolved trade dispute between China and the United States as well as political tensions with Iran. Yesterday's contrasting data prints from Germany and the U.S. would have one believe EUR/USD should be tumbling toward new lows. However, investors seem reluctant to push aggressively. Germany's July ZEW showed continued and sharp deterioration for economic sentiment and current conditions. Meanwhile, U.S. June retail sales suggest the U.S. economy remains robust and consumers feel confident. The contrasting data, and wider German-U.S. yield spreads, did send EUR/USD lower, but not drastically.

GBP/USD – The pound retreated to a 27-month low of $1.2396 overnight as Boris Johnson and Jeremy Hunt, the two candidates to be Britain's next prime minister, vied to outgun each other on taking a harder Brexit stance. Their positions appear to be leading markets to price a sharply higher risk of Britain leaving the European Union on October 31 without any transition trading agreements in place. That would potentially force the Bank of England to cut interest rates to stave off an economic catastrophe. The pound suffered its biggest one-day fall yesterday since March after Boris Johnson and his rival to be Conservative Party leader, Jeremy Hunt, said late on Monday they would not accept the so-called Northern Irish backstop element of Theresa May's Brexit deal. Sterling last traded little changed at $1.2411.

USD/JPY – The dollar was almost flat at 108.17 yen after advancing 0.3% against the yen overnight on the strong U.S. retail sales data. USD/JPY is getting a boost following very solid U.S. June retail sales data. Indeed, that data should lift Q2 GDP growth enough to make the Fed's easing guidance even more heavily dependent on bad news abroad being an eventual threat to the U.S. economy. The Fed's semi-official status as the world's central bank, and the lingering threat to global trade and growth from protectionism, give the Fed some latitude to do an insurance rate cut on July 31. However, a panic-like 50bp cut, that's still priced as a 22% probability, is limiting the rebound in U.S. yields and USD/JPY following the strong sales report.

Currency Range for today

Currency Pair Lower Upper
USD/INR 68.55 68.95
EUR/INR 76.75 77.55
GBP/INR 85.05 85.85
JPY/INR 0.6325 0.6385

Important data releases today

Time Ccy Event Forecast Previous
2:00 PM GBP CPI (YoY) (Jun) 2.0% 2.0%
2:30 PM EUR CPI (YoY) (Jun) 1.2% 1.2%
6:00 PM USD Building Permits (Jun) 1.300M 1.299M
8:00 PM USD Crude Oil Inventories -2.694M -9.499M