View: Rupee may trade in 71.00-71.80 range.

By Gaurang Somaiyaa

The rupee in the past few weeks has been consolidating in a range of 71.20 to 72.20 despite weak economic numbers. But consistent inflows into the equity segment has been keeping the unit supported on lower levels.

Last week, the RBI released its policy statement and contrary to expectations decided to hold rates unchanged and maintain its stance accommodative. The central bank slashed growth forecast to its lowest level in a decade. Market participants are closely tracking the FII flows, as it has curtailed major weakness in the rupee.

In the last three months, FIIs have poured in funds worth over $6 billion thereby supporting the broader sentiment of the market. This week, the focus will be on inflation and industrial production and weaker-than-expected numbers could keep the rupee weighed down. We expect the rupee to quote in the range of 71.00 to 71.80 (spot).

Euro for the whole week consolidated in a narrow range of 1.1020 to 1.1120 following lack of triggers from the euro zone, but volatility within the range was witnessed as statements from the US and China kept most market participants on the edge. Last week, euro rose after the US President Donald Trump mentioned that the trade talks are “moving right along” striking an upbeat tone to the ongoing talks.

The president’s remarks came after Chinese officials reiterated their stance that some US tariffs must be rolled back for a phase one deal. This week, the focus will be on the ECB policy statement and expectation is that the central bank could maintain a status quo approach but what stance the newly appointed ECB head adopts will be importantly watched.

Pound rose sharply against the US dollar after some polls suggested that the Conservatives are expected to gain a majority in this week’s upcoming polls. The election results will basically trigger a move for the currency, but any hiccups faced by the Conservatives could keep the pound weighed down. On the economic calendar, from the UK, GDP numbers will be important to watch and better-than-expected growth numbers could keep the currency supported at lower levels.We expect that volatility for pound could remain high and before the election it could trade marginally positive, but a trend for the currency will be determined only after the outcome of elections that is scheduled on December 12. We expect pound to quote in a wide range of 1.3270 to 1.3050.