Currency Weekly

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June 22, 2015

Highlights of the week ending June 19, 2015

Equity markets
Indices

Close Prev. Close Change %

DJIA

18015.95

17898.84

0.65

DAX

11040.1

11196.49

-1.40

FTSE

6710.45

6784.92

-1.10

HANGSN

26760.53

27280.54

-1.91

NIKKIE

20174.24

20407.08

-1.14

NIFTY

8224.95

7982.9

3.03

Europe trade balance increased to 24.3B in April from 19.9B

in March

US Empire State manufacturing index fell below 0 to -2 levels

in June from 3.1 mark in May

US industrial production decreased by 0.2% in May from -0.5%

in April

India WPI fell by 2.36% in May from 2.65% in April

UK CPI rose to 0.1% in May from -0.1% in April

German ZEW economic sentiments declined to 31.5 in June

from 41.9 in May

US building permits increased to 1.28M units in May from 1.14M

units in April

India trade deficit narrowed to $10.41 billion in May from

$10.99 billion in April, imports fell by 16.52% and exports by
20.19% on a Y-o-Y basis

UK average earnings index increased by 2.7% in April from

2.3% in March

UK claimant count fell by 6500 in May from 7800 in April

Europe final CPI stood unchanged at 0.3% compared with its

flash estimate

US Federal Reserve kept its benchmark interest rates

unchanged at <0.25%

UK retail sales rose by 0.2% in May from 0.9% in April

US CPI increased by 0.4% in May from 0.1% in April

US core CPI rose to 0.1% in May from 0.3% in April

US unemployment claims declined to 267K for the week ending

June 12, 2015 from 279K in the preceding week

US Philly Fed manufacturing index increased to 15.2 in June

from 6.7 in May

German PPI remained unchanged at 0.0% in May from 0.1% in

April

Euro zone current account rose to 22.3 billion in April from

18.08 billion in March

UK public sector net borrowings increased to 9.4 billion in

May from 5.5 billion in April

Forex
Currency
DOLLAR INDEX

Close Prev. Close Change %

94.085

94.972

-0.93

63.5625

64.06

-0.78

1.1352

1.1266

0.76

EURINR

71.8361

71.6644

0.24

GBPUSD

1.5883

1.5561

2.07

GBPINR

100.7307

99.2354

1.51

USDJPY

122.71

123.39

-0.55

JPYINR

51.65

51.79

-0.27

USDINR
EUROUSD

Weekly performance of currencies

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Currency Weekly

Currency performance and outlook for the current week

DX
The US Dollar decreased by 0.93% against major currencies in the previous week. Dollar showed weakness for the
third consecutive week. Dollar remained under pressure in the early trading session as the investors remained cautious
ahead of the Federal Open Market Committee (FOMC) meeting and mixed economic data. In the later session after the
FOMC meet dollar declined sharply as the US Federal Reserve in its monetary policy meet lowered the long-term
projections for the US interest rates. The median estimate for the end of 2016 fell to 1.625% as compared with 1.875%
forecast in March. The Fed cut its forecast for gross domestic product (GDP) growth to 1.8-2.0% from 2.3-2.7% in
March. Yellen said, The committee continues to judge that the first increase in the federal funds rate will be
appropriate when it has seen further improvement in the labour market and is reasonably confident that inflation will
move back to its 2 percent objective over the medium-term. The dollar index touched a low of Rs93.563 and closed
at Rs94.085.
Outlook: Dollar is expected to trade with negative bias in this week as the US Federal Reserve lowered its long-term
projections for US interest rates and cut its forecast for GDP growth, this prompted investors to push back expectations
on the timing of an initial rate hike. Further, the Fed Chair Janet Yellen said she still wants to see more decisive
evidences that a moderate pace of economic growth will be sustained before raising rates. However, a sharp downside
would be cushioned on the back of expectation of a strong housing data, cored durable goods orders data and
personal spending data. The USAs existing home sales are expected to improve to 5.27M units in May from 5.04M units
in April. The US core durable goods orders forecasted to increase by 0.6% in May from -0.2% in April. Final GDP is
estimated to show that the US economic growth contracted by 0.2% in Q1 2015 from -0.7% preliminary data. The US
dollar index may find support near 93.2, a sustained break below this level and DX may go down to 92.15. A strong
resistance lies near 95.4, a sustained break above this level and DX may rise to 96.3.
USD-INR
The Indian Rupee appreciated by 0.78% in the previous week on the back of weakness in dollar coupled with a rise in
risk appetite in the domestic markets. Dollar gave up its strength after Fed monetary policy meeting. The Federal
Reserve lowered its long-term projections for US interest rates and cut its forecast for GDP growth. Further, rupee
gained strength on speculation that the government was set to hike overseas investment limit in local debt and set
the limit in local currency denomination providing more space for investments. Positive macro-economic datas like
current account deficit supported rupee. However, a sharp gain was prevented as India consumer price index (CPI)
accelerated to 5.01% in May from 4.87% in April. India trade deficit narrowed but weak global demand led to six
straight annual fall in merchandise exports. The Indian Rupee touched a high of Rs63.52 and closed at Rs63.5625
against dollar.
Outlook: The Indian Rupee is expected to remain under pressure. Weakness in dollar and rise in risk appetite in the
domestic markets will support rupee. Dollar is expected to weaken as the US Federal Reserve lowered its long-term
projections for US interest rates and cut its forecast for GDP growth which may prompt market to push back expectations
on the timing of an initial rate hike. Further, a positive macro-economic data from the country may prove favourable
for Indian Rupee. Whereas, the month-end dollar demand from importers may add downside pressure on currency.
Worries over Greeces possible default on its payment to the International Monetary Fund (IMF) and Greece exit from
euro zone may prove fatal for rupee. The USD-INR spot may find support near Rs63.1, a sustained break below this
level and it may plunge to Rs62.7. A strong resistance lies near Rs63.8, a sustained break above this level and it may
rise to Rs64.3.
EUR
Euro appreciated by 0.76% against dollar in the previous week. In the early trading session euro remained under
pressure as the talks between international creditors and Greece ended without any progress. Further, a weak economic
data from euro zone added downside pressure. In the mid session of the week euro gained strength and made a fourweek high of 1.1436 on the back of weakness in dollar. Dollar gave up its strength as the US Federal Reserve lowered
its long-term projections for US interest rates and cut its forecast for GDP growth. In the later session euro gave up its
major strength on the worries over possible Greece default on its payment to the IMF and Greece exit from euro zone.
The euro touched a high of 1.1186 and closed at 1.1350 against dollar.

Sharekhan

June 22, 2015

Currency Weekly

Outlook: Euro in the early trading session is expected to trade with positive bias on hopes that Greece may break
through the deal. Market will remain cautious ahead of the Euro summit as this could be the last chance for Greece to
avoid an exit from euro zone. Greece submitted a fresh proposal which would win Athens a six months extension and
supply of up to 18 billion euro in rescue funds. In the later session euro may give up its strength on the back of
expectation of mixed economic data. German flash manufacturing purchasing managers index (PMI) is expected to
improve to 51.5 in June from 51.1 in May. Europe flash manufacturing PMI is likely to decline to 52.0 in June from 52.2
in May. German IFO Business Climate forecasted to fall to 108.2 in June from 108.5 in May. Additionally, the European
Central Bank (ECB)s bond-buying programme will weigh on euro. The EUR-INR spot may face resistance near Rs72.9,
a sustained break above this level and EUR-INR may rally till Rs73.8. A strong support lies near Rs71.6, a sustained
break below this level and EUR-INR may plunge to Rs70.9.
GBP
Pound appreciated by 2.07% against dollar in the previous week. Pound gained strength as UK CPI data showed that
the country exited negative inflation in May. UK CPI rose to 0.1% in May from -0.1% in April. UKs average earnings
index increased by 2.7% in April from 2.3% in March. UK unemployment rate stood near six-year low at 5.5%. Bank of
England (BoE)s meeting minutes showed that policymakers voted unanimously to keep rates on hold at a record low
of 0.5%. Demand for pound increased on the back of worries over possible Greece exit from the euro zone. Further,
weakness in dollar after FOMC meeting supported sterling. However, a sharp gain was prevented as the Confederation
of British Industry lowered its forecasts for UK growth and ratings agency S&P downgraded its outlook on the UK's
sovereign rating to negative and warned that there is at least a one-in-three probability that the UK will lose its AAA
rating within the next two years. Pound touched a high of 1.5930 and closed at 1.5880 against dollar.
Outlook: Pound is expected to remain under pressure as no major economic data from the country is scheduled this
week. Strong economic datas from the country may support pound. The BoE meeting minutes showed that policymakers
voted unanimously to keep rates on hold at a record low of 0.5%. Weakness in dollar may prove favourable for pound.
However, sharp gains may be prevented as the Confederation of British Industry lowered its forecasts for UK growth
and ratings agency S&P downgraded its outlook on the UK's sovereign rating to negative and warned that there is at
least a one-in-three probability that the UK will lose its AAA rating within the next two years. The GBP-INR spot may
face strong resistance near Rs101.6, a sustained break above this level GBP-INR may rally till Rs102. Immediate
support lies near Rs100.5, a sustained break below this level and GBP-INR may plunge to Rs99.1.
JPY
Japanese Yen appreciated by 0.55% in the previous weeks trading session against dollar. Yen gained strength on the
back of weakness in dollar and rise in risk aversion in the domestic markets. Further, worries over Greece default on
its payment to the IMF increased the demand for safe haven. Strong macro-economic data supported yen. However, a
sharp gain was prevented on comments from the Bank of Japan (BoJ) governor Kuroda. The BoJ Governor, Kuroda said
he wasnt trying to influence the yens exchange rate in remarks last week. He said that the real effective rate isnt
an indicator of bilateral exchange rates and he wasnt intending to say hes not seeking a weaker yen. Yen touched a
high of 122.43 and closed at 122.6810 against dollar.
Outlook: Yen is expected to trade with negative bias on the back of expectation of weak economic data from the
country. Japan flash manufacturing PMI is expected to decline to 50.6 in June from 50.9 in May. Tokyo core CPI is
forecasted to ease to 0.1% in June from 0.2% in May. Further, a demand for safe haven my fall on hopes that Greece
may break through the deal and avoid default. Rise in risk appetite in the domestic markets will prove unfavourable
for yen. Market will remain cautious ahead of BoJs monetary policy meeting minutes. The JPY-INR spot may face a
strong resistance near Rs52.3, a sustained break above this level and JPY-INR may rally till Rs53.0. A good support lies
near Rs51.3, a sustained break below this level and JPY-INR may plunge to Rs50.8.

Sharekhan

June 22, 2015

Currency Weekly

Major macro-economic data this week

Date

Region

Event

22/6/2015

Europe

Euro Summit

Survey

Prior

Impact
Heads of state from euro zone countries, including European
Central Bank President, Mario Draghi and International
Monetary Fund Managing Director, Christine Lagarde, are due
to meet about Greece's current agreement with the European
Financial Stability Facility. If Greece gets the aid it will be
positive for euro.

22/6/2015

US

Existing Home Sales

5.27M

5.04M

It's a leading indicator of economic health because the sale

of a home triggers a wide-reaching ripple effect. Better than
expectation would be positive for dollar.

23/6/2015

Europe

French Flash Manufacturing PMI

50.1

49.4

Accelerating manufacturing activity in France would prove

positive for euro.

23/6/2015

Europe

German Flash Manufacturing PMI

51.5

51.1

Accelerating manufacturing activity in Germany would prove

positive for euro.

23/6/2015

Europe

Flash Manufacturing PMI

52

52.2

Decline in manufacturing activity would be negative for euro.

23/6/2015

US

Core Durable Goods Orders m/m 0.60%

-0.20%

It's a leading indicator of production; higher orders will lead

to higher prices. A stronger-than-expected data would be
supportive for dollar.

23/6/2015

US

Flash Manufacturing PMI

54.2

54

Accelerating manufacturing activity in the USA would prove

positive for dollar.

23/6/2015

US

New Home Sales

524K

517K

It's a leading indicator of economic health. It shows annualised

numbers of new single-family homes that were sold during
the previous month. A stronger-than-expected data would
be supportive for dollar.

24/6/2015

Japan

Monetary Policy Meeting Minutes

It's a detailed record of the Bank of Japans most recent

meeting, providing in-depth insights into the economic and
financial conditions that influenced their vote on where to
set interest rates. Any hawkish statement would be positive
for yen.

24/6/2015

Europe

German Ifo Business Climate

108.2

108.5

It's a leading indicator of economic health. If data falls below

forecast it would weigh on euro.

24/6/2015

US

Final GDP q/q

-0.20%

-0.70%

It is a key indicator of economic growth. There are three

versions of GDP released a month apart; advance, preliminary
and final. Contraction in GDP would be negative for dollar.

25/6/2015

Europe

GfK German Consumer Climate

10.1

10.2

It is a leading indicator of consumer spending, which accounts

for a majority of the overall economic activity. Disappointing
data would be negative for euro.

25/6/2015

US

Unemployment Claims

271K

267K

Rise in Jobless claims signals more people filing for

unemployment insurance. It signals economic health of a
country as consumer spending is correlated with labour
market conditions. Weak data will add downside pressure on
dollar.

25/6/2015

US

Personal Spending m/m

0.70%

0.00%

Consumer spending accounts for a majority of the overall

economic activity. It's one of the most important gauges of
economic health. A better-than-expected data would be
positive for dollar.
contd...

Sharekhan

June 22, 2015

Currency Weekly

Date

Region

Event

26/6/2015

Japan

Tokyo Core CPI y/y

Survey

Prior

0.10%

0.20%

Impact
It is the change in the price of goods and services purchased
by consumers, excluding fresh food. If the data trail the
forecast, it would lead to concerns that the economy is not
able to move ahead in the desired fashion. Thus, a data below
the forecast would weigh on yen.

26/6/2015

UK

BoE Gov Carney Speaks

As the head of a central bank, Carney has more influence

over nations currency value. Any hawkish statement would
be bullish for pound.

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