By Gaurang Somaiya
Rupee came under pressure in the latter part of the week following suspected dollar outflows and broader strength in the dollar against its major crosses. Momentum turned negative also as the Chinese Yuan fell to the lowest level in a year after a disappointing trade balance data from China. Data showed that imports have fallen every month in 2023 from the year-ago period. Exports have fallen year-on-year for every month since April as global demand for Chinese goods wanes. Euro fell to the lowest level in three-months after Eurozone services PMI for August was revised to 47.9 from a preliminary number of 48.3. This marked the first contraction in services activity this year and was the weakest reading since February 2021.
This week, on the domestic front, inflation numbers will be keenly eyed as vegetable prices continue to remain elevated, but expectation is that it could ease off in August. Last week, oil prices got a boost after OPEC+ nations decided to prolong its voluntary supply cut until the end of this year. The decision was in addition to the production cut announced in April. Market participants will continue to monitor price rise action in various nations as that will guide the central banks for further policy actions. US CPI number will also be keenly watched this week; expectation is that inflation could inch higher following an uptick in global crude oil prices. Apart from CPI number, retail sales and consumer sentiment number will also be important to watch. Better-than-expected data could extend gains for the dollar. For the USDINR pair, we expect momentum to be marginally positive and it could quote in the range of 82.30 and 83.50.
Major crosses were weighed down following weaker-than-expected economic numbers from the Euro zone and the UK. From the Eurozone, ECB policy statements will be released and this time the officials could be divided on whether to raise rates or take a pause. We expect that the central bank this time could decide to take a pause as slower growth becomes a concern. Pound has been one of the weakest of the lot and this week will be taking cues from the employment and industrial production number. We expect that momentum in the case of the pound could continue to remain weak and selling on rallies could be the strategy for the week.
(Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services. Views expressed are the author’s own. Please consult your financial advisor before investing.)
