Market opening expected today (18/07/2012)

USDINR- Will open up

EURINR- Will open up

GBPINR- Will open up

JPYINR- Will open up

Forex Exchange Morning Report (18/07/2012)

USD

The dollar strengthened on Tuesday following Fed Chairman Ben Bernanke's testimony to the Senate, in which he restated his 'stimulus-if-required' stance to monetary policy as well as underscoring the need for 'fiscal balance' from lawmakers. This upset expectations for more stimulus and led to a rise in the dollar. On the data front, CPI in June remained at 1.7% yoy when it had been expected to moderate to 1.6% whilst CPI Ex Food & Energy showed a basis point fall in line with expectations. Industrial Production in June rose by 0.4% which was just above the 0.3% expected. Demand for U.S securities showed a rise with Net Long-Term TIC Flows in May beating expectations to rise to $55.0bn compared to $41.3bn expected and $27.2bn previous. Total Net TIC flows showed a $101.7bn surplus compared to the -$8.2bn previously.

EUR

The euro fell after Bernanke's testimony to Senate in which he reiterated a 'wait-and-see' stance upsetting expectations that he would announce further QE. The euro fell rapidly despite strengthening in the first half of the day when yields on Spanish short-term bills fell at auction. The yield on the 12-month fell from just over 5% to 3.92% previous and to 4.24% vs 5.11% on the 18-month bill. Longer-dated debt however didn't fare as well as the yield on the 10-year Spanish bond rose to 6.79% - up 5.7bps whilst the Italian 10-year rose to 6.01% up 1.8pbs. On the data front, the ZEW Sentiment survey fell, but not as deeply as expected. The German version of the ZEW in July fell to -19.6 when it had been expected to fall to -20.0 and was -16.9 previously. The Euro-zone version showed an even more dramatic fall in Economic Sentiment to -22.3 versus -20.1 previously. The German Current Situation survey fell to 21.1 versus 30.0 expected and 33.2 previous.

GBP

The pound fell after the release of softer-than-expected inflationary data on Tuesday increased the possibility the BOE might use more stimulus to boost growth. Overall the stats indicated a fall in inflation with CPI dropping to 2.4% in June yoy versus 2.8% expected and 2.8% previous. Core CPI fell to 2.1% versus an expected rise of 4pbs. Mom CPI fell by -0.4% compared to -0.1% expected and -0.1% previous. RPI fell to 2.8% versus 3.0% expected and 3.1% previous. Sterling fell against the dollar after the Chairman of the Fed Ben Bernanke made a speech to the Senate in which he maintained his wait-and-see stance despite a more doveish tone having been expected. The absence of any hints of more QE led to a rise in the dollar. The pound was stronger versus the euro, however, and briefly hit a three and a half year high following comments from the Italian PM Mario Monti about the dire economic problems in Sicily.

JPY

The yen traded mixed at the time of writing on Tuesday, rising against the riskier currencies like the euro and the pound but falling to the dollar which strengthened after expectations of more easing were dealt a blow by Fed Chairman Bernanke who failed to hint at more QE in his testimony to Senate, an outcome which surprised many investors expecting the opposite. There was no economic data for the yen but there was commentary from the Finance Minister Jen Azumi who threatened to weaken the yen if speculators continued to push it higher. It is possible the currency may moderate at its current position as a result of the threat, however, the currency remains vulnerable to safe-haven flows as a result of investor fears over contagion from the crisis hit euro-zone and there does not seem to be any sign that the problems in that region are close to a solution yet, which leaves the outlook for the yen still quite bullish overall.