CURRENCY WEEKLY REPORT

(17th to 21st Feb)

What's Inside??

 Perspective

 USDINR

 Dollar Index

 EURUSD

 GBPUSD

 USDJPY

 Performance
Perspective

China’s fiscal spending climbed 8.1% in 2019 from the previous year, the finance ministry said ,
outpacing economic growth as policymakers sought to ward off a sharper slowdown.

Britain’s economy flat-lined in the final three months of 2019, when the country was in a
deadlock over Brexit that was only broken by Prime Minister Boris Johnson’s December election
victory, leading to some signs of a recovery early this year.

Federal Reserve Chair Jerome Powell was fairly upbeat about the outlook for the U.S. economy in
the first of his twice-a-year updates to Congress, but he cited a potential threat from the
coronavirus in China and concerns about the economy’s long-term health.

Retail inflation in India rose to the highest since May 2014, pushed up by expensive food items
and higher telecom tariffs. CPI inflation stood at 7.59% in January 2020 compared to 7.35% in
December 2019. Inflation in food and beverages rose to 11.8% as compared to 12.2% in December
2019.

The European Union should continue to recognize Britain’s financial services industry as
meeting equivalent regulatory standards when a Brexit transition period ends next year, finance
minister Sajid Javid said.

Japan's gross domestic product in October-December was likely weaker than in the previous
quarter due to the impact of the sales tax hike and a typhoon, Economy Minister Yasutoshi
Nishimura said.
Currency Update

USDINR

Gone by
Initially, rupee appreciated due favourable crude oil
prices in the international market. Further, gains in
the domestic equities market also supported the
rupee. However, importers demand at lower levels
contained gains in the rupee. India posted weaker
than previously reported IIP data which also
pressurized the rupee. India witnessed sharp rise in
CPI and WPI data. This has dashed hopes of any
interest rate cut by the RBI in the near term at least.

Ahead

The rupee may trade in narrow range. India’s sharp

rise in inflation and decline in industrial production
remain great concerns. Trade deficit has once again
widen in January. The rupee will track movement in
domestic equities market and crude oil prices in the
international market for further direction. Market will
also monitor developments in the coronavirus and its
implication on the global economy. Overall, the Source: Bloomberg
outlook of rupee is mixed.
Currency Update

Dollar Index

Gone by US ISM Non Manufacturing

The dollar rose as US Fed chairman Jerome Powell in

its testimony to Congress commented that outlook of
the US economy remains positive. Further, US posted
rise in CPI data which also supported the dollar. US
industrial production and retail sales both also posted
better than previously reported data. However, US
reported rise in initial jobless claims data. This
contained gains in the dollar.

Ahead

US may post better than previously reported building

permits and PPI data. However, US housing starts,
Philly Fed manufacturing index, existing home sales
and initial jobless claims data may remain weaker
than previously reported. US Markit manufacturing
and service PMI may also remain weak. Market will Source: Bloomberg
closely look the developments in coronavirus and its
implication on trade deal between the US and China.
Overall, outlook of dollar is mixed.
Currency Update

EURUSD

Gone by
Eurozone Industrial Production
The euro remained under pressure due to consistent
gains in the dollar index. Further, euro zone posted
weaker than previously reported industrial production
data which also pressurized the euro. Germany’s CPI
data also remained muted. Germany and Eurozone’s
GDP growth data also remained weaker than previously
reported. However, Eurozone’s trade balance expanded.
This contained losses in the euro.

Ahead
Germany may post weaker than previously reported Zew
current conditions and economic sentiments data.
Germany’s Gfk consumer climate also may remain
muted. Eurozone and Germany’s both may post weaker
than previously reported Markit manufacturing and
service PMI data. Euro zone’s CPI may remain muted.
The recently released economic data showed a sign of
weakness in the economy. Hence the pressure is rising
Source: Bloomberg
on the ECB to announce additional easing measures.
Overall, outlook of euro is sideways to bearish.
Currency Update

GBPUSD

Gone by
Initially, pound rose as UK posted better-than- UK Industrial production
expected industrial production, manufacturing
production and trade balance data. However, UK’s
GDP growth rate data remained weaker than
expected. This contained gains in the pound. Gains in
the dollar index as US posted better-than-expected
key economic data. This also pressurized the pound.
Uncertainty regarding the Brexit talks also weighed
on the sentiments.

Ahead
UK may post better than previously reported retail
sales data. UK may also report rise in CPI data. This
might offer some relief to the Bank of England. UK
may also post weaker manufacturing and service PMI
data. Other than that there is no major economic data
to be released. The U.K. and EU are slated to meet in
March for trade talk, but tough rhetoric from both
sides has raised fears that rough negotiations lie Source: Bloomberg
ahead. Overall, outlook of pound is mixed.
Currency Update

USDJPY

Gone by
Japan Machine Tools
Initially, the yen appreciated as demand for safe haven
arose after new cases of coronavirus outbreak
reported in China. Further, Japan posted rise in PPI
data. This also supported the yen. However, Japan
posted weaker than preciously reported machine
orders and tertiary industry activity data. This
contained gains in the yen. Strength in the dollar index
as US posted better than expected key economic data
also pressurized the yen.

Ahead

Japan’s may post weaker GDP growth rate data.

Japan’s trade deficit may expand. Core machinery
orders may also fall. Other than that there is no major
economic data to be released. Market will continue to Source: Bloomberg
monitor developments in the coronavirus and its
implication for the global and Japan economy. Overall
the outlook of yen is mixed.
Currency Update

Source: Bloomberg
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