Global currencies traded in tight ranges


Global equity markets refrained from holding any major positions in the holiday truncated week


Aditi Gupta,

Economist,

Bank of Baroda

Mumbai, December 26, 2023: Global markets traded in narrow ranges in the holiday thinned trading week. Data from US late last week showed that PCE index fell by 0.1% in Nov’23 on a MoM basis, noting its first negative reading since Apr’20. On a YoY basis, PCE moderated to 2.6% from 2.9% in Oct’23. Core PCE also moderated to 3.2% from 3.4% in Ocr’23 (YoY). This was also reflected in University of Michigan’s consumer confidence index which rose sharply to 69.7 in Dec’23. New durable goods orders also rose by 5.4% in Nov’23, after falling by 5.1% in Oct’23. On the other hand, new home sales fell by 12.2% to 590,000. Overall investors’ expectations of rate cuts by Fed have strengthened with an almost 75% probability (CME FedWatch) of the first rate cut in Mar’24. On the domestic side, RBI minutes highlighted that MPC members remained wary on inflation amidst the volatility in food prices.

  • Global equity markets refrained from holding any major positions in the holiday truncated week. US stocks monitored host of data releases such as core PCE which softened and also capital goods orders which inched up. Hang Seng and Shanghai Comp inched down. Sensex rose by 0.3%, supported by power and oil and gas stocks. It is trading lower today in line with other Asian stocks.
  • Global currencies traded in tight ranges. DXY fell by 0.1% to a 5-month low as investors view of rate cuts was reinforced after US PCE inflation moderated further.  JPY continued to remain under pressure and fell by 0.2%. INR appreciated by 0.2% following a decline in oil prices. It is trading further stronger today, in line with other Asian currencies.
  • Global yields noticed thin trading. Japan’s 10Y yield rose by 4bps. UK’s 10Y yield fell by 2bps monitoring contraction in GDP in Q3. India’s 10Y closed stable at 7.19%. It is trading at the same level today. Notably, the bids received for 7-day VRR auction reflected tighter liquidity conditions and higher demand for funds.

(The views expressed in this research note are personal views of the author(s) and do not necessarily reflect the views of Bank of Baroda. Nothing contained in this publication shall constitute or be deemed to constitute an offer to sell/ purchase or as an invitation or solicitation to do so for any securities of any entity.)

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