Currency Market 6-Dec :RBI MPC surprises with pause!

GBP/USD pair surged to seven month high levels of 1.3160 levels as Conservative party moves closer to winning elections. The gains in GBP/USD pair were further supported by rising UK 10 year bond yield. EUR/USD pair surged above 1.11 handle despite dismal German factory order and Euro retail sales numbers, which declined by 0.6% M-o-M basis.

On domestic front, RBI’s monetary policy committee kept interest unchanged at 5.15% and retained its accommodative stance. RBI’s MPC has lowered growth forecasts from 6.1% to 5%, owing to dismal economic activity in Q2. MPC also raise its inflation forecasts for H2 FY 19-20 from 3.5-3.7% to 4.7-5.1%. It seems that given low marginal utility of another rate cut and hardening inflationary pressure RBI MPC decided to pause.

Bond and currency markets have shown contrasting reactions as Bond yields surged to 6.63% and INR appreciated nearly 30 paisa to 71.30. Bond markets are expected to trade with negative bias amid overhang of excess bond supply. On currency front, USDINR opened the session at 71.26 against previous close of 71.28. USDINR pair has first support at 71.25-28 levels and second support at 71.10-15 levels. USDINR pair has first resistance at 71.44-48 levels. Range for day 71.15-71.40