INR: USD/INR Through 79.00, Gold Import Tax Raised
Spot USD/INR has pushed through 79.00 in early trading today. We have stabilized around the 79.10 level. This is fresh record lows for the rupee, with the pair spending the last few sessions very close to the 79.00 handle.
- The pull back in Brent crude has seen little relief for INR. As we noted earlier in the week, pent up USD demand appears to be keeping USD/INR dips quite shallow. Still, INR is outperforming modestly on an intra-Asia basis.
- The Indian authorities are looking to address the trade imbalance. They raised the import tax on gold to 12.5% from 7.5%. Gold imports were at decade highs last year.
- At the same time the authorities stated it would raise taxes on exports of gasoline, diesel and jet fuel. Such exporters are also mandated to sell locally first. Hence the net impact on the trade position remains to be seen.
- Local equities are off by around 1%. Offshore investors continue to sell local shares, although the pace of outflows has slowed somewhat. Week to date outflows are $287mn. For June as a whole, we sit at -$6.3bn.
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BUND TECHS: (M2) Eyeing The Bear Trigger
- RES 4: 157.87 High Apr 7
- RES 3: 157.29 High Apr 8
- RES 2: 155.52/89/156.00 50-day EMA / High Apr 28
- RES 1: 153.45/155.33 20-day EMA / High May 12
- PRICE: 151.63 @ 05:11 BST June 1
- SUP 1: 150.49 Low May 9 and the bear trigger
- SUP 2: 150.15 0.764 proj of the Mar 7 - 29 - Apr 4 price swing
- SUP 3: 150.00 Psychological round number
- SUP 4: 149.49 Low Jul 13 2015 (cont)
Bund futures traded lower again Tuesday and breached initial support at 151.89, May 18 low. The primary trend direction is down. Fresh cycle lows in April and May, maintained the price sequence of lower lows and lower highs - the definition of a downtrend. MA studies are in a bear mode condition, reinforcing the trend condition. A continuation lower would open 150.49, the bear trigger and May 9 low. Firm trend resistance is 155.33, the May 12 high.
USD: USD Gains Extending
The USD, which has been on the front foot for much of the session, is seeing gains extend.
- All G10 FX are now weaker on the day, with AUD/USD now to fresh lows sub 0.7170, after trading resiliently for much of the session. JPY and NZD are off by 0.4%.
- Other pairs are more mixed. USD/CNH is the standout in the USD/Asia space, up over 0.40% to be above 6.7000. This has dragged other pairs higher. Only INR is up slightly for the day
- These moves have coincided with a dip in US equity futures, although they remain in positive territory. Hong Kong shares are also a drag on risk appetite.
RBA: VIEW: ANZ: Strong Wages Point To A 40bp Lift In The Cash Rate In June
ANZ note that “the Q1 GDP report has prompted us to look for the RBA to lift the cash rate by 40bp at the June meeting – previously we expected 25bp. While GDP was in line with our expectations, today’s data confirmed the very strong average hourly wages growth that yesterday’s Business Indicators report implied. Our estimate of 5.3% y/y is well above our expectations from just a few weeks back, certainly much stronger than the signal from the Wage Price Index, and seemingly tracking above the RBA’s forecast. It is also worth noting that the broadest measure of consumer inflation (the household consumption deflator) had the highest quarterly increase since 1990 (outside the GST). This suggests to us that policy needs to lean more strongly against the broadening of inflation pressures. As such we think the strength of the price and wage measures in the GDP data should be enough to convince Governor Lowe that “there is a very strong argument” to deviate from a regular 25bp move and get the cash rate a little higher a little bit faster.”
