Rupee Opens Higher Ahead Of US Jobs Data

Rupee Opens Higher Ahead Of US Jobs Data

07 Jun 2019 09:10 AM

USD/INR – The Indian rupee opened higher against the dollar ahead of the U.S. non-farm payroll data, which will be closely watched amid Federal Reserve rate cut bets. The rupee opened at 69.19 to a dollar compared with its previous close of 69.2650. The data will be scrutinized closely to assess the likelihood of the Fed cutting rates at the upcoming meeting. Probability of the Fed lowering the interest rates this year has increased in recent weeks amid mounting U.S.-China trade tensions. A top Fed policymaker said that an interest rate cut may be needed in light of the risks to growth posed by the trade uncertainties. Fed Chair Jerome Powell has suggested that rates could be cut if the ongoing trade war affected the economic outlook. The odds of a quarter percentage rate cut at the June meeting are currently at 20%, up from 6% a month ago. For the July meeting, at least a 25 basis-points rate cut is assigned an over 60% probability, according to the CME FedWatch Tool.

EUR/USD – The euro jumped half a percent against the dollar on Thursday after the European Central Bank refrained from hinting at an interest rate cut and instead pushed back the timing of its first rate hike since the 2008 financial crisis. The euro rose because investors had expected an even more dovish signal from the ECB and an acknowledgement of weak economic growth in the bloc. The ECB said it would lend to banks at a rate just 10 basis points above its minus 0.4% deposit rate in a new targeted longer-term refinancing operation, or TLTRO. The euro has strengthened recently on the back of dollar weakness caused by rising bets on a U.S. interest rate cut. The single currency was 0.47% higher at $1.1270 after brushing a 1-1/2-month high of $1.1310 earlier this week.

GBP/USD – The British currency looked broadly directionless until the contest to replace the prime minister was concluded. Versus the dollar, sterling managed to gain but that was because of weakness in the greenback rather than any pound-specific triggers. Investors are reluctant to take positions on the pound as they await the outcome of the Conservative party leadership contest to succeed Prime Minister Theresa May, who is stepping down. Traders are also mostly downplaying monetary policy signals, believing that Bank of England Governor Mark Carney will not raise interest rates until the form of Britain's European Union exit is clear. The outcome of the leadership contest would be a likely catalyst for the UK currency. Against the dollar the pound rose 0.3% to $1.27, having recovered from a five-month low of $1.2560 hit on Friday as the dollar has weakened.

USD/JPY – USD/JPY is consolidating June losses in a 108.00-50 range while awaiting the result of today's U.S.-Mexico talks on migration and tariffs and Friday's U.S. employment report, which is even more important after a meager 27k May ADP increase (Full Story). A growing divergence between an expanding U.S. services and slowing manufacturing sector, as ADP and ISM results highlight, suggests escalating protectionism is taking a toll on U.S. growth, enough so to get the Fed thinking about rate cuts. The Fed's concern about below-target inflation will probably be heightened by today's report that Q1 and Q4 unit labor costs were revised more deeply negative, suggesting less inflation from labor tightness and more leeway to cut rates.

Currency Range for today

Currency Pair Lower Upper
USD/INR 69.10 69.60
EUR/INR 77.60  78.40
GBP/INR 87.50 88.30
JPY/INR 0.6360  0.6420

Important data releases today

Time Ccy Event Forecast Previous
6:00 PM USD Nonfarm Payrolls (May) 185K 236K
6:00 PM USD Unemployment Rate (May) 3.6% 3.6%


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