USD/INR – The Indian rupee is expected to open higher against the dollar after U.S. President Donald Trump indicated that he is open to extending the March 1 China tariff deadline, boosting global risk appetite. The rupee opened at 70.48 against the dollar compared with its previous close of 70.70. Meanwhile, data released after Indian markets closed on Tuesday showed that retail inflation in Asia’s third-largest economy eased further to 2.05% in January, compared with the downward revised reading of 2.11% in the previous month. The January print was the lowest in one-and-a-half years and was lower than 2.48% median forecast in a survey of economists.
EUR/USD – The euro gained 0.1% to $1.1335. Traders seem to have moved away from dollar dominance over the last two sessions. This weakness is directly related to the improving risk sentiment around trade. The euro has bounced off an important support level and can extend its gains. Risk appetite in broader markets was revived after U.S. President Donald Trump said on Tuesday that he could let the March 1 deadline for a trade agreement with China slide for a little while, but that he would prefer not to and expects to meet with Chinese President Xi Jinping to close the deal at some point.
GBP/USD – Sterling gained 0.1% to $1.2900. The British currency rose off three-week lows against the dollar on Tuesday as Prime Minister Theresa May said the government would seek to speed up ratification of its Brexit withdrawal deal with the European Union if time gets too tight. May told lawmakers on Tuesday to hold their nerve over Brexit and give her more time to negotiate a deal acceptable to both the European Union and the British parliament. The deadlock and delays over the terms of Brexit have heightened fears among financial investors of a no-deal and disorderly, economically disruptive departure even if the majority of British lawmakers want to avoid one.
USD/JPY – The dollar was steady versus the yen at 110.65. USD/JPY’s breakout to 110.65 hasn’t come with commensurate support from rising Treasury yields, relying instead on re-risking flows driven by hopes U.S. economic data and trade war news before week’s end will suffice. Some of that erosion is due to demand for still relatively high-yielding Treasuries and the USD, but USD/JPY will eventually need more yield support, not just re-risking into stocks and out of yen-haven trades to maintain its advance. For the moment, the markets are betting the U.S. and China will agree at, or shortly thereafter, this week’s trade talks to extend their tariff-increase truce, cushioning risk appetite. Thus U.S. CPI, retail sales, industrial production, capacity utilization and Michigan Sentiment data coming in the next three days must reinforce the U.S. economic outperformance that a rising USD/JPY implies.
Currency Range for today
Important data releases today
|3:00 PM||GBP||CPI (YoY) (Jan)||1.9%||2.1%|
|7:00 PM||USD||Building Permits||1.290M||1.328M|
|7:00 PM||USD||Core CPI (MoM) (Jan)||0.2%||0.2%|
|9:00 PM||USD||Crude Oil Inventories||2.668M||1.263M|