ECB flags more stimulus ahead as financial conditions tighten

Abhishek Goenka IFA Global

The Jul-Sep GDP print at -7.5% beat consensus expectation of -8.2%. Though the economy is technically now in a recession, it would be safe to say the worst is behind us.

Nevertheless, there are still down side risks to the economy and it would be premature to withdraw accommodation and therefore the RBI in its forthcoming monetary policy on Friday is likely to continue to sound dovish and prioritize growth, while overlooking elevated inflation prints. US Dollar Index continues to remain under pressure but is struggling to break lower. The Euro made another attempt at breaking 1.20 but got rejected there. 1.34 is proving difficult for the Sterling to break as well.

Until a breakout is confirmed, one should continue trading the ranges. FPIs poured in a record $8bn into Indian equities in November but USDINR did not appreciate to that extent as a significant part of the inflows were mopped up by the RBI. RBI's FX Reserves now stand at $575bn and have increased by $100bn this financial year so far.

For the day we expect the Rupee to trade between 73.88-74.18 range with an upside bias. We could see a bit of correction in equities due to weak global cues and peak margin reporting kicking in for FPIs from today onwards.

Strategy: Exporters are advised to build long term exposure in 74.60-75.50 range. Importers are advised to cover through options. The 3M range for USDINR is 73.00 – 75.40 and the 6M range is 73.00 – 76.00.

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Author

Abhishek Goenka

IFA Global

Mr. Abhishek Goenka is the Founder and CEO of IFA Global. He pilots the IFA Global strategic direction with a focus on relentlessly improving the existing offerings while constantly searching for the next generation of business excellence.

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