The FED has kept key interest rates unchanged as expected. While the impact of US-Iran conflict on inflation and growth remains unclear, tariff-related inflation is expected to ease in the second half of the year. The dot plot signals two rate cuts ahead. The Dollar Index has moved up and could test 101-101.50 in the near term on a rise past 100.60. Euro has dipped below 1.15 as expected and can test 1.14 before pausing for a reversal. EURINR has risen as expected and may continue to rise towards 107/108. EURJPY is holding within 183.50-182.50 region while USDJPY is trading below resistance at 160 but has fair chances of breaking higher on further Dollar strength. USDCNY remains bullish to 6.90/95 while above 6.85. Aussie and Pound have dipped back within their respective ranges of 0.6940-0.72 and 1.3250-1.35. USDINR closed higher yesterday at 92.6350 but currently quotes 93.04 on the NDF on Dollar strength and sharp rise in crude prices. Note that the Indian FX market is closed today for Gudi Padwa. Any decline in the quote through the day would reflect in the spot opening tomorrow but we may expect fair chances of a gap up opening.
Dollar Index (100.064) has moved up and could test 101-101.50 in the near term on a rise past 100.60. However, thereafter, it has to be seen if the index would dip for a correction or rally towards our long term expected targets of 102+ levels. On the other hand, the EURUSD (1.1535) has limited its rise to 1.1552 and has dipped back towards 1.14 as expected. We may expect the 1.14-1.16 region to hold for now.
EURINR (106.8113) seems to be inching up slowly. A rise to 107/108 could be possible in the near term.
EURJPY (183.26) is stable within the 183.50-182.50 region. This range can continue to hold for a few more sessions.
Dollar-Yen (159.61) has dipped after testing 159.90. The pair is holding below 160 for now but whether it will decline towards 159 or lower or break higher will have to be seen. If the Dollar Index rises past 101, it can pull up USDJPY as well towards 160+ levels soon. Watch price action at 160.
USDCNY (6.8948) may rise slowly towards 6.90 and higher while above 6.85.
Aussie (0.7045) has dipped on Dollar strength. The range of 0.6940-0.72 may hold for the near term.
Pound (1.3285) has dipped back within the range of 1.3250-1.35 which can hold for the near term.
USDINR (92.6350) broke past 92.50 yesterday to close at 92.6350 on the OTC but currently quotes 93.04 on the NDF on Dollar strength and sharp rally on crude prices. The FX Indian market is closed today for Gudi Padwa. Any dip in the NDF rate today would reflect on the opening price tomorrow. But fair chances of a gap up opening still remains.
The US Treasury yields have risen back well. They are heading to our expected near-term targets much faster than expected. The Fed left the rates unchanged at 3.5%-3.75%. Except for the inflation (PCE) other economic projections were kept unchanged. The Fed now projects the PCE to be at 2.7% in 2026, up from 2.4% projected in December. The German yields have also risen back well. A further rise from here can take the yields higher without seeing the corrective dip expected earlier. The 10Yr GoI is moving up and keeps intact our overall bullish view.
The US 10Yr (4.27%) and 30Yr (4.89%) Treasury yields have risen back sharply. The rise to 4.3%-4.35% (10Yr) and 4.9%-4.95% (30Yr) is happening much faster than expected.
The German 10Yr (2.94%) and 30Yr (3.49%) yields have risen back well. A further rise from here can take them up to 3%-3.05% (10Yr) and 3.55%-3.6% (30Yr). That in turn will negate the dip to 2.88% (10Yr) and 3.45% (30Yr) expected earlier.
The 10Yr GoI (6.7330%) is approaching 6.75% as expected. A break above it will open the doors for 6.8%, that we have been mentioning for some time.
Global equities remain under pressure as the Dow has fallen sharply and can decline further towards 46000. DAX also looks weak after a gap down opening and may fall towards 22000 in the coming weeks. Nifty is showing some resilience with gains over the last three sessions but needs a break above 24000 to extend the rally towards 24500-25000 and negate the downside risk towards 22000. Nikkei continues to follow the bearish trend and can decline towards 50000-48000 while below 56000, while Shanghai may remain range bound within the 4000-4200 zone for now.
Dow (46586, +0.11%) has fallen sharply to a low of 46374 yesterday amid hotter US PPI data and Powell’s inflation warning. A further fall towards 46000 can be seen in the near term.
DAX (23,253, -1.19%) plunged to a low of 23121 and closed higher at 23532 yesterday, but today it has opened lower with a gap down at 23164 and remains bearish towards 22000 over the coming weeks.
Nifty (23,777.80, +0.83%) has remained positive for the last three consecutive sessions. A break above 24000 is needed to extend the rally towards 24500-25000, which would negate our earlier expectation of a decline towards 22000.
Nikkei (53620, +0.13%) has fallen back in line with our expectations and can decline further towards 50000-48000 over the medium term while below 56000.
Shanghai (4,023.20, -0.98%) can continue to oscillate within the 4000-4200 range for some time.
Crude prices have surged sharply with Brent leading gains on rising Middle East tensions and can move towards $ 115-$ 120, while WTI also remains bullish towards $ 104-$ 106. Gold has dropped on strong US data but may bounce towards $ 4900-$ 5000 if $ 4800 holds, else it can fall towards $ 4600-$ 4500. Silver remains weak and can decline further towards $ 70. Copper has broken lower on rising inventories and may fall towards $ 5.25-$ 5.00. Natural Gas has rebounded on geopolitical tensions and can rise towards $ 3.50.
Brent ($ 112.09) has surged to a high of $ 111.90 yesterday after Iran said it will attack other Middle Eastern energy infrastructure in retaliation for US and Israeli strikes. Further bullishness towards $ 115-$ 120 can be seen in the near term. Thereafter, it remains to be seen whether tensions in the Middle East push prices beyond $ 120 or lead to a pullback.
On the other hand, WTI ($ 96.21) has not risen as sharply, but the price outlook remains bullish towards $ 104-$ 106 in the near term.
Gold ($ 4861.70) has fallen sharply to a low of $ 4809 yesterday due to hotter than expected US PPI and the Fed’s inflation warning. While the support near $ 4800 holds, a bounce back towards $ 4900-$ 5000 can be seen. Otherwise, a sustained break below this level can turn the outlook bearish towards $ 4600-$ 4500.
Silver ($ 76.48) has fallen to a low of $ 75.02 yesterday in line with our expectations and can decline further towards $ 70 in the near term.
Copper ($ 5.5150) has broken sharply below the mentioned range and plunged to a low of $ 5.46 yesterday due to a surge in LME copper inventories, the highest since 2019. A further decline towards $ 5.25-$ 5.00 can be seen in the near term.
Natural Gas ($ 3.2530) has bounced back sharply to a high of $ 3.2110 amid tensions in the Middle East and can eventually rise towards $ 3.50.
GMT 1:30 IST 07:00 Australia Labour Force
…Expectations 20.3 …Previous 17.8
GMT 3:00 IST 08:30 BOJ Meeting
…Expectations 0.75 …Previous 0.75
GMT 7:00 IST 12:30 UK Unemp
5.2 …Expectations 5.3 …Previous 5.2
GMT 8:30 IST 14:00 SNB Mtg
…Expectations 0.00 …Previous 0.00
GMT 12:00 IST 17:30 BOE Mtg
…Expectations 3.75 …Previous 3.75
GMT 12:00 IST 17:30 UK BOE Minutes
…Expectations 0-3-6 …Previous 0-4-5
GMT 12:30 IST 18:00 US Philifed Index
14.7 …Expectations 17.5 …Previous 16.3
GMT 13:15 IST 18:45 ECB Mtg
2.15 …Expectations 2.15 …Previous 2.15
GMT 14:00 IST 19:30 US New Home Sales
721 …Expectations 723 …Previous 745
DATA YESTERDAY
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GMT 10:00 IST 15:30 EU Final CPI (YoY)
…Expectations 1.9 …Previous 1.9 …Actual 1.9
GMT 11:45 IST 17:15 BOC Meeting
…Expectations 2.25 …Previous 2.25 …Actual
GMT 12:30 IST 18:00 US PPI
…Expectations 0.3 …Previous 0.5 …Actual
GMT 12:30 IST 18:00 US PPI ex Food & Energy (MoM)
0.6 …Expectations 0.3 …Previous 0.8 …Actual
GMT 18:00 IST 23:30 US FOMC Meeting
…Expectations <3.75 ...Previous <3.75 ...Actual GMT 20:00 IST 01:30 US TICS (Net foreign purch of long-term Sec)
…Expectations 71.6 …Previous 28.0 …Actual