INDIA: Country Wrap: Brazil Wants Deeper India Ties

The BBDXY USD index is down 0.2% today at 1209.86 off the intraday low of 1209.18 with the fall broad based across G10 currencies. It reached 1211.95 early in the session but has been pressured by lower US bond yields with the 2-year down around 3bp from Friday. Kiwi and Aussie have benefited the most as risk appetite also improved and drove equity markets higher across the region.

• NZDUSD is up 0.4% today to 0.6038, close to the intraday high of 0.6042. Earlier Q1 manufacturing volumes were strong up 2.4% q/q, while RBNZ Chief Economist Conway expects core inflation to fall to the band mid-point but noted that the labour market remains lacklustre.
• AUDUSD has trended higher and is currently up 0.4% to 0.6518. Initial resistance is at 0.6538, 5 June high. AUDNZD is slightly higher at 1.0796 following a peak of 1.0803 but has not been able to hold breaks above 1.08.
• USDJPY is down 0.3% to 144.47, close to the intraday low of 144.35. Japanese data today on balance were slightly stronger with Q1 GDP revised up to flat on the quarter from -0.2% q/q, the Eco Watchers survey rose in May and the April trade deficit was slightly lower than expected.
• EURUSD is 0.2% higher at 1.1418 as is GBPUSD at 1.3554 leaving EURGBP flat at 0.8424.
• USDCAD is up 0.1% to 1.3684 after outperforming the G10 on Friday. 

• RES 4: 107.830 High Apr 22  
• RES 3: 107.690 High Apr 30
• RES 2: 107.610 High May 23 and a key near-term resistance
• RES 1: 107.320/475 Low May 29 / High May 27 
• PRICE: 107.235 @ 06:07 BST Jun 9
• SUP 1: 107.195 Low Jun 6    
• SUP 2: 107.125 Low May 12 and a key support
• SUP 3: 107.000 Round number support 
• SUP 4: 106.890 2.000 proj of the May 23 - 29 - 30 price swing

Schatz futures remain in a bull cycle, however, the sharp pullback last Thursday does undermine the recent bull theme. A resumption of gains would highlight the fact that the retracement has been a correction. Initial resistance to watch is 107.475, the May 27 high. A break would be a bullish development. For bears, an extension lower would instead expose the key support at 107.125, the May 12 low.

Nordea now look for the Riksbank to deploy a 25bp rate cut in June.

• That would take the Bank’s policy rate to 2.00%.
• They then expect rates to be left on hold through the end of ’26.
• They previously expected rates to be left at 2.25% over that hoirozn.
• The main reasons for the change in forecast are “GDP growth as well as inflation being lower than expected”.
• Nordea note that their “inflation forecast is lower than the bank’s view through Q425, which could trigger an additional cut”. However, Nordea believe that “the economic recovery will continue and the uncertainty regarding the global situation will ease later this year”.
• They conclude by noting that “moreover, since the Riksbank didn’t act earlier this year when inflation was around 3%, then the bank is likely to accept an inflation somewhat below the 2% target next year as long as the economy is recovering”.