INR is trading further stronger today
On domestic front, Rabi sowing data remained a cause of concern.
Dipanwita Mazumdar
Economist,
Bank of Baroda
Mumbai, January 8, 2024: Global markets are again re-thinking their positions. US non-farm payroll additions came in more than expected at 216k (est.: 175k). This data follows two successive downward revisions of previous months’ prints. The average hourly earnings data also inched up by 0.4% on sequential basis, more than estimated at 0.3%. Thus, traders started repricing and US 10Y yield went up. CME Fed watch tool is now showing a probability of 62.3% for 25bps rate cut in Mar’24, which was pared down from the probability of 73.4%, seen a week earlier. In Eurozone, CPI inched up to 2.9% in Dec’23 from 2.4% in Nov’23, as energy aid in Germany is seen phasing out. ECB also remained cautious of the evolution of interest rate trajectory in its latest commentary. On domestic front, Rabi sowing data remained a cause of concern.
- Global stocks ended mixed. Investors monitored US jobs report and ISM non-manufacturing PMI. Apart from this, a pickup in inflation in Eurozone also weighed on investor sentiments. Based on this, investors have pared back expectations of aggressive rate cuts. Stocks in US rose, while Hang Seng and Shanghai Comp fell. Sensex rose by 0.2%, led by gains in capital goods and technology stocks. It is trading lower today, in line with other Asian indices.
- Global currencies closed broadly higher against the dollar. DXY was flat amidst mixed macro data. EUR closed flat following a pickup in inflation in the region. GBP was 0.3% higher, supported by improvement in construction PMI, increase in house prices and pickup in new car sales. INR ended stronger led by equity inflows. It is trading further stronger today, in line with other Asian currencies.
- US 10Y yield rose by 5bps following stronger US non-farm payroll data. Thus, the timing of rate cut cycle remains blurry. The reverberation is felt across yields in UK and Germany. In Japan, 10Y yield moderated a tad as traders delayed the expectation of exit from ultra dovish policy following the economic damages from earthquake. India’s 10Y yield also fell a tad. It is trading at 7.21% today.
(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.)
