Currency Market 5-Mar: BoC cuts rate by 50 bps

Globally, Bank of Canada cut interest rates by 50 bps to 1.25% amid fears of Corona Virus. However, USD/CAD pair, which had spiked to 1.3431, is trading broadly unchanged at 1.3390 levels. US ISM non-manufacturing PMI released at 57.3 against previous reading of 54.9. Dow Jones rebounded more than 4% to 27,090 levels. The gains in Dow Jones were further supported as Joe Biden is leading democratic nomination with 566 delegates, while Bernie Sanders is second with 501 delegates. On other hand, South Korea has reported 438 new coronavirus cases – totaling to 5,766 cases and country also reported total 35 deaths due to virus.

On domestic front, Service PMI for Feb released at 57.5, near seven year high, suggesting green shots in the economy.  Bond markets continued to rally as 10 year G Sec yield fell to 6.23%, tracking its global peers. On currency front, USDINR pair witnessed a volatile session yesterday, amid large inflow in SBI cards IPO. SBI card IPO has been subscribed by 56.67 times in QIB category. Technically, USDINR pair has support at 72.90 levels and first resistance at 73.62 levels and second resistance at 73.90 levels

Currency Market 4-Mar: FED eases to fight Corona!

Globally, US Fed has cut interest rate by 50 bps to target range 1%-1.25%.  FED statement – “The fundamentals of the U.S. economy remain strong. However, the corona virus poses evolving risks to economic activity”.  One can wonder that – In Health emergencies, like corona virus, How can FED cut support economic activity? But then again, FED has also responsibility towards financial markets too. US 10 year bond yield slipped below 1% to 0.98% for very first time. FED future fund rates are suggesting 55% probability of another 25 bps rate cut in April meeting. On other hand, EUR/USD pair surged to 1.1150, rallying on familiar fundamental setup.

On domestic front, India reported few new cases of Corona Virus, raising concerns of a possible pandemic. RBI has also issued a statement – “coronavirus triggering risk-off sentiments and flights to safe haven. Spillovers to financial markets in India have largely been contained”. G-Sec 10 year bond yield opened the session 6.28%, which is below rising trend line support of 6.30%. Bonds are likely to trade with biddish bias amid possibility of interest rate cut by RBI. On currency front, partially convertible rupee is trading with weakening bias at 73.30 levels. The gains in USDINR pair further supported by arbitrage opportunity b/w off-shore and on-shore markets. 1-month NDF is trading 20 paisa higher, indicating buying pressure in pair. Technically, USDINR pair has filled a daily gap b/w 1-Nov/2-Nov 2018 as trading high is 73.45 levels. USDINR pair has support near 72.77 levels and first resistance at 73.45 and second resistance at 73.90 levels

Currency Market 2-Mar: Monetary Easing to calm Markets?

In line with market expectations, Global central banks started to hint towards possible monetary easing to support financial markets (which are spooked by Corona Virus) economy. US FED released a rare statement – stressing that FED will act appropriately to support economy. Similarly, Bank of Japan also issued a statement – Bank of Japan will strive to provide ample liquidity through market operations and asset purchases. Consequently, USD/JPY rebounded to 108.20 from 107.10 levels, Gold fell more than 3% to 1580 levels and Asian equities are trading in green with Shanghai composite trading 3% positive.

On domestic front, India’s GDP grew in line with expectation by 4.7% in December quarter. CSO has also revised September quarter growth to 5.1% from earlier estimates of 4.5%. GDP growth in current quarter likely to be hampered by global spread of Corona virus and seasonal decline in government spending. GST tax collection for Feb stand at 1.05 lakh cr against target of 1.15 lakh cr. Although, GST collection missed the target but a reading above 1 Lakh cr should be taken as a good sign.

Domestic equity markets are trading in green, tracking their Asian peers. 10 year G-Sec yield fell to 6.33% tracking global bond sentiments. On currency front, USDINR pair is trading near 72.20. USDINR pair has immediate support at 72.05 levels and first resistance at 72.25 levels and second resistance at 72.40 levels. Range for day seen as 72.00-72.40