INDIA: Country Wrap: Rate Cuts Not Over
- Reserve Bank of India Governor Sanjay Malhotra’s recent comments in an interview suggest that the central bank’s interest-rate-cutting cycle is not over, according to economists from Nomura led by Sonal Varma. The RBI’s growth and inflation forecasts are likely to be undershot as the year progresses, they write. The RBI is likely to pause rate cuts in August, then resume with cuts of 25 basis points each at its policy meetings in October and December (source BBG)
- There is a general sense that India is an inward-looking economy. After all, agriculture makes up a fifth of the economy, and India is more domestic demand-driven than some export-led Asian neighbours. Having said that, we find that India has grown at its fastest pace in periods of rising integration with the world. (source India Express)
- The NIFTY 50 is up +0.20% so far today, looking to recover yesterday's losses of -0.37%
- The rupee fell today by -0.08% to 86.31
- Bonds were marginally higher in yield with the 10YR at 6.27% (+0.5bp)
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JGBS: Belly Leads Curve Cheaper, Tariff Discussions In Focus
JGB futures are weaker and near Tokyo session lows, -27 compared to settlement levels.
- March Tertiary Industry Index fell 0.3% m/m versus -0.2% estimate.
- “Japan's Prime Minister Shigeru Ishiba says the country won't compromise its national interests in trade talks with the US by fixating on time limits. Japan will continue to seek exemptions for all additional tariffs imposed by the US and won't accept a deal that doesn't address the 25% tariff on cars.” (per BBG)
- Cash US tsys have twist-steepened in today's Asia-Pac session, with yields 1bp lower to 4bps higher, as the market continued to digest late Friday news that Moody's Ratings downgraded the US credit score.
- "US House panel approves Trump tax cut bill, setting up a possible vote on passage this week" - [RTRS]
- Cash JGBs are flat to 2bps cheaper across benchmarks, with the belly leading. The benchmark 10-year yield is 1.5bps higher at 1.478% versus the cycle high of 1.596%.
- Swap rates are flat to 1bp lower, with swap spreads tighter.
- Tomorrow, the local calendar will see Tokyo Condominiums for Sale data alongside 20-year supply.
- The G7 will hold a meeting from the 20th to the 22nd, with attention focused on whether foreign exchange rates will be discussed in relation to tariffs.
GBPUSD TECHS: Trend Outlook Remains Bullish
- RES 4: 1.3550 High Feb 24 ‘22
- RES 3: 1.3510 1.236 proj of the Feb 28 - Apr 3 - 7 price swing
- RES 2: 1.3402/3444 High May 6 / High Apr 28 / 29 and the bull trigger
- RES 1: 1.3360 High May 14
- PRICE: 1.3305 @ 06:11 BST May 19
- SUP 1: 1.3140 Low May 12
- SUP 2: 1.3110 50-day EMA
- SUP 3: 1.3041 Low Apr 14
- SUP 4: 1.2968 Low Apr 11
Recent weakness in GBPUSD appears corrective. The May 13 bounce highlights a possible reversal pattern - a bullish engulfing candle. The pattern remains valid and if correct, signals the end of the recent corrective cycle and a resumption of the uptrend. Key support to watch is 1.3117, the 50-day EMA. A continuation higher would refocus attention on the key resistance and a bull trigger, at 1.3444, the Apr 28 / 29 high.
BOBL TECHS: (M5) Recovers From Recent Lows
- RES 4: 119.960 High Apr 7 and the bull trigger
- RES 3: 119.780 High Apr 22
- RES 2: 119.600 High May 7
- RES 1: 118.858/118.950 20-day EMA / High May 12
- PRICE: 118.620 @ 05:52 BST May 19
- SUP 1: 118.060 Low May 14 and 15 and the bear trigger
- SUP 2: 117.680 Low Apr 9 and a key support
- SUP 3: 117.600 Low Mar 28
- SUP 4: 117.410 Low Mar 27
A bearish corrective phase in Bobl futures remains intact, however, the recovery from last week’s low does signal a possible reversal and the end of the corrective cycle. A continuation higher would open 118.950, the May 12 high. Clearance of this level would strengthen a bullish theme. On the downside, a resumption of weakness would expose 117.680, the Apr 9 low and a key support. The bear trigger is 118.060, the May 14 / 15 low.
