INR Is Trading Weaker Today

In UK, house price index firmed up in Feb'24, while PMI reading still trailed below the 50 mark. On domestic front, PMI data rose to its 5 month high supported by both domestic and external demand

Dipanwita Mazumdar, 

Economist, 

Bank of Baroda 

Mumbai, March 4, 2024: Delayed start to the rate cut cycle by major central banks led to rally in global stocks buoyed by risk on sentiments. Yields continued to paint a volatile picture. In the US, a weaker ISM manufacturing print has led to fall in 10Y yield. Even for other economies, yields traded in a narrow range monitoring comments of major central bank officials. Amongst other major macro releases were University of Michigan’s inflation expectations index, which still showed some stickiness in inflation. In the Euro area, inflation print especially the core inflation data provided some discomfort. In UK, house price index firmed up in Feb’24, while PMI reading still trailed below the 50 mark. On domestic front, PMI data rose to its 5 month high supported by both domestic and external demand. Even inflationary pressures moderated. 

• Global stocks rallied amidst expectations of lower policy rates. Weak manufacturing PMI in US has reignited the debate on timing of Fed rate cuts. Even in Eurozone and Asia, manufacturing PMIs painted a sombre picture. Amongst major indices, Nikkei surged the most to close at a record-high. Robust GDP numbers, pushed Sensex to an all-time high. It is trading further higher today in line with other Asian stocks.
• Global currencies ended mixed. DXY fell by 0.3% as US ISM manufacturing PMI slipped further in the contractionary zone in Feb’24. EUR gained as inflation in Eurozone was higher than expected led by elevated core. GBP too gained as UK’s manufacturing PMI showed improvement. INR closed flat. It is trading weaker today, while Asian currencies are trading stronger.
• Global yields closed mixed. US 10Y yield fell by 7bps as ISM manufacturing data softened. Germany’s 10Y yield closed stable as member of the Governing Council of ECB hinted at a more cautious approach before embarking on rate cut cycle. China’s 10Y yield rose by 3bps supported by better macro data. India’s 10Y yield fell by 2bps. It is trading at 7.05% 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.)