Cable
broke through the strong resistance of 1.3010 amid expectation of Conservative
party winning the election. The gains in GBP/USD pair, which rallied more than 1%
to 1.312, were further supported by stronger UK service PMI. On the other hand,
Trump took another U turn by suggesting that US, China trade talks were going “very
well”. Consequently, USD/CNH pair corrected to 7.055 from 7.08 and US 10 year
bond yield rebounded to 1.76%.
On
domestic front, RBI monetary policy committee is likely to cut interest rate by
another 25 bps to arrest the slowdown in domestic economy. It is noteworthy
that RBI has already cut interest rates by 135 bps in current cycle but
transmission has been tepid. To improve the transmission, there has been some
murmurs of operational twist, wherein RBI will buy long term bonds
and sell short term bonds. India’s 10 year bond yields remained elevated at
6.45% amid worsening fiscal deficit.
USD/INR
pair opened the session on a flat note at 71.53 levels. USD/INR pair will take
further cues from RBI monetary policy actions and it forward guidance. USD/INR
pair has first support at 71.28-71.31 levels and second support at 71.12-15
levels. USD/INR pair first resistance 71.67-70 levels and second resistance at
71.90. Range for the day – 71.30 to 71.80 owing to RBI policy.
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