Currency Markets Price outlook- Gnanasekar Thiagarajan, Director, Commtrendz Research IMC, 02nd March 2017.

Currency Market Outlook

Currency Market Outlook FOMC meeting on March 15th. Even as markets remained jittery and disappointed, hawkish comments from two Fed officials supported the USD index. After the hawkish statements from the Fed officials and upbeat ISM data, the likelihood of a rate hike in March jumped to 66% from 35% a day prior, based on CME Group 30-Day Fed Fund futures prices.

Currency Market Outlook Trump in his speech to the Congress pledged to overhaul the immigration system, improve jobs and bring a massive tax relief to the middle class, he offered few clues on the plan and actual measures. His speech came as a disappointment to the investors, who have been looking for reassurances from the Trump administration with regards to campaign promises.

Currency Market Outlook Ahead of the FOMC meeting on March 15th, the US is dollar is likely to remain the frontrunner. The politics and uncertainty related to Trump’s announcements could take a back-seat as witnessed yesterday. However, if the Fed decides to stay on hold in March (as we expect), we could see a marginal correction in the USD post the FOMC meet.

Currency Market Outlook Theresa May's Brexit bill is likely to be defeated in the House of Lords, causing more ambiguity in terms of exit. The main issue is related to rights for EU citizens residing in the UK, which is likely to be debated for a long period and could prolong the process going forward. The euro remained weak against the dollar, as markets didn’t read much into the PMI news. The rise in PMI was not broad-based and not across all the union countries. France and Spain, for example, showcased lower than expected PMI readings. More uncertainty on the back of elections continue to undermine the Euro.

Currency Market Outlook With the possibility of rate hikes still underpinning the dollar, technicals favour a rise to 108.00 in the coming quarters.

Currency Market Outlook Euro looks weak and probably headed towards Parity or even below in the coming quarters.

Currency Market Outlook INR looks strong in the short-term, but global dollar strength could force the currency to depreciate eventually.

Currency Market Outlook The biggest question is, will the Rupee Appreciate more or would continue to depreciate marginally? It looks unlikely for any sustained appreciation. We favour the 66.00-66.20 levels to be very supportive and the dollar to edge higher again towards 69.00 levels.

Currency Market Outlook CONCLUSION Fundamentally, we feel FED is expected to raise rates and the elections in Eurozone and Brexit could add to uncertainties. Crudeoil is also expected to rise, adding marginally to our current account burden. Due, to the above our short to medium-term view is: ( 1Q 2017): Probability of a pullback from recent lows to 66.10-20 is high, then rising 67.50. ( 2Q 2017): It is expected to push higher further towards 69.00 or even higher.

Currency Market Outlook Cheers And Thank You!!