Forex daily Recap – USD/INR Declined on Interest Rate Cut Announcement

USD/INR declined as RBI cuts interest rates by 25 bps making the repo rate to 5.75%. USD/MXN pair hovered near its monthly high amid rising US tariff concerns. Fiber soars over unchanged Interest rate decision.
Nikhil Khandelwal
Banknotes of one hundred rupees.

USD/INR

The Rupee pair started trading on Thursday near 69.64 levels and was hovering near 69.19 levels at around 15:31 GMT. The pair showcased a smooth decline throughout the day in the middle of Central Bank rate cut. The RBI announced a reduction in the interest rates by 25 bps, making the repo rate to 5.75%. The Bank also changed its stance from “neutral” to “accommodative”, leaving space for more upcoming rate cuts.

USDINR 60 Min 06 June 2019

RBI Policymakers have reduced the repo rate for third straight time. Meanwhile, the Officials also slashed the GDP growth forecast. The Bank decreased the forecast figures from the previous 7.2% to 7.0% as inflation stays below 4% target. The Central Bank has taken this stance of the rate cut to increase the overall liquidity in the market, considering the macroeconomic factors.

USD Index

The Greenback was taking rounds near its one-month lows as US Unemployment data and Trade Balance reported poor figures. The US Dollar Index made the opening today near 97.31 levels and initiated the downward rally. Bears started taking control over the Buck after the release of lower-than-expected USD-specific data. The April Trade Balance recorded $-50.8 Billion over $-50.7 Billion forecasts. Both the Continuing Jobless Claims computed since May 24, and Initial Jobless Claims calculated since May 31 reported higher-than-estimated. Also, the Q1 Non-Farm Productivity came out 0.1% lower than the market expectation of 3.5%. Adding to the sour sentiment, Q1 Unit Labor Costs reported -1.6% in place of consensus estimates of -0.8%. The USD Index marked the day’s lowest point near 96.79 levels following such adverse US reports. The Index attempted to recover strength but failed to do so as Fed’s Kaplan mentioned his dovish stance for the economic outlook.

USD/MXN

Mexican Peso pair stayed near its monthly high amid rising US tariff concerns over Mexican exports. Last day, the US Officials had set a meeting with the Mexican counterpart over the 5% tariffs imposed on all the exports of Mexico. US President tweeted that the meeting showed “not nearly enough” progress. Trump reiterated that the taxes would continue to increase by 5% every month, culminating to 25% in October this year. The President puts his demand to curb illegal immigration into the US territory as a solution to the eradicate tariffs.

USDMXN 60 Min 06 June 2019

Meantime, Mexican economists smell a near-by recession out of a probable debt crisis. Credit rating agency Fitch downgraded Mexico’s sovereign debt previous day. Moody’s also reduced their overall economic outlook to negative, adding further pressure to the Mexican Peso. Nevertheless, Mexican President Andres Manuel Lopez Obrador stood quite positive of getting into a deal with the US. The President prepares a list of US products and plans for retaliation against the United States.

EUR/USD

The Euro pair started the day near the 1.1236 bottom levels. The pair remained close to the same opening levels throughout the Asian trading session. Following the release of German April MoM Factory Orders, the EUR/USD pair gradually took pickup. The German data came out near 0.3% over the market expectation of 0.1%. The pair shrugged to the in-line reported Eurozone Q1 QoQ Employment Change figures. However, the Euro pair reacted positively to the Eurozone Interest rate decision reporting 0.0% in-line with the estimates. The pair jumped from 1.1219 levels to 1.1272 levels at around 11:45 GMT. The EUR/USD pair made further upliftments amid weaker US Unemployment and trade data. The pair marked the day’s high near 1.1310 levels.

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