Market Update - On the OTHER hand: June 20, 2024

Central bank actions, ECB makes the first move

In the fortnight filled with major action, BOJ, Fed, and RBI kept the rates on hold while ECB finally decided to deliver the first cut post pandemic inflation surge. They have maintained that the future cuts are not guaranteed and will be data dependent. FOMC took a slightly hawkish tone as gauged from the dot plot change .    INR Rupee spot and forward view : The USDINR pair traded in a narrow range (83.37 – 83.60) despite higher volatility observed in other major currencies on account of data surprises – US NFP, CPI, and FOMC dot plot. The medium-term outlook remains positive for INR on bond inclusion, lower crude price, higher GDP growth, expected equity inflows, continuation of government (policies); USDINR may be sold on upticks.   Though the FED remains highly data dependent, investors see signs of weakening economic indicators and price larger cuts, which should support premiums curve at current levels, and it might continue to trade in the 1.55-1.70% range on 1-year.   UST View : The US market is witnessing softer labour market data in recent data releases and the US 10-year trajectory defines, showing a range of 4.19-4.35 in the near term.