INR: Positive Equity Sentiment Continues, Wholesale Inflation Data Coming Up
Spot USD/INR remains closed onshore, as do domestic bond yields, but onshore equities are open, with sentiment tracking higher at this stage. The main bourses are up by around 0.75/0.80% at this stage. Stocks are only 1.5% off April highs. The positive spill over is evident for the INR in the NDF space. The 1 month USD/INR NDF is back sub 79.60, around 0.3% below yesterday's closing levels. This compares with the onshore spot close of 79.65 from the end of last week. Current NDF levels are implying a firmer rupee spot open tomorrow.
- Note, coming up shortly is Indian wholesale price data for July. The market expects a +13.7% print, versus +15.18% last month. Recall on Friday that July CPI printed a touch softer than expected at 6.71% versus 6.75% forecast and above 7% prior. Inflation trends remain key to the RBI outlook for the next 3-6 months.
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USDCAD TECHS: Fresh YTD High
- RES 4: 1.3300 High Nov 4 2020
- RES 3: 1.3247 2.0% 10-dma envelope
- RES 2: 1.3224 High Jul 14
- RES 1: 1.3166 3.0% Upper Bollinger Band
- PRICE: 1.3029 @ 16:43 BST Jul 15
- SUP 1: 1.2936/32 Low Jul 8
- SUP 2: 1.2868 50-day EMA
- SUP 3: 1.2819 Low Jun 28 and key support
- SUP 4: 1.2763 Low Jun 13
USDCAD surged Thursday and in the process confirmed a clear break of resistance at 1.3084, the Jul 5 high. The break confirms a resumption of the primary uptrend, paving the way for gains towards a vol band based resistance of 1.3247 and the 1.3300 handle further out. Moving average studies remain a bull mode condition, reinforcing the current positive outlook. Key support has been defined at 1.2936, the Jul 8 low.
US: Late Corporate Credit Update: Near Lows for Week
Investment-grade corporate credit risk cooled Friday, near session lows as stocks looked to finish near highs. Risk appetite improved as Atlanta Fed Bostic, SF Fed Daly helped temper the hawkish post-CPI rhetoric. SPX eminis currently trading +64.5 (1.7%) at 3858.25; DJIA +589.96 (1.93%) at 31224.49; Nasdaq +171.9 (1.5%) at 11424.61.
- Investment grade risk measured by Markit's CDXIG5 index -3.666 to 91.022; CDXHY5 high yield index at 98.699 (+0.895).
- Outperforming credit sectors (tighter or least wide): Communications (-2.7) Consumer Staples and Health Care both -2.5.
- Lagging sectors (wider or least narrow): Materials (-0.8), Industrials, Utilities and Energy all -1.9.
US TSYS: Fed Speak Tempers Hawkish Pricing Ahead Blackout
Tsys trading moderately higher, inside session range as Fed speak appeared to move markets more than economic data. Reminder: Fed enter policy blackout at midnight tonight.
- Tsys reversed early pre-data gains on slightly better than expected June Retail Sales +1.0% MoM vs. 0.9% est, Sales Ex-autos +1.0% MoM vs. 0.7% est. Down-revisions to control group (-0.3% for May vs. 0.0% prior) spurred rebound with futures back to pre-data levels. Overlooked: lower-than-expected import price numbers, including an 0.4% drop in M/M ex-petroleum import prices, the 2nd consecutive contraction. The stronger dollar is starting to feed through into lower import prices
- Fed Speak delivered brief real vol as mkts extended session ranges. Rates moved higher as Atlanta Fed Bostic walked back post-CPI comments that "everything is in play for future policy decisions" that helped spur the 100bp, saying today that the Fed wants "orderly" policy transition, that moving "too drastically" would undermine economy.
- Rates sold off after StL Fed Bullard lived up to his hawk status saying he would not rule out the possibility of 100bp hike at next FOMC, seeing little difference now between 75 and 100bp.
- SF Fed Daly helped temper the hawkish rhetoric as rates pared gains stating she is already "seeing signs inflation is slowing", while concern over recession not high on her list of outcomes.
- Currently, 2-Yr yield is down 0.2bps at 3.1305%, 5-Yr is down 1.2bps at 3.0529%, 10-Yr is down 3.1bps at 2.9281%, and 30-Yr is down 1.4bps at 3.09%.
