By Gaurang Somaiya
Rupee at the start of the week consolidated in a narrow range and volatility remained low as investors remained cautious ahead of the important numbers that were expected to be released on the global front. On the domestic front, India’s fiscal balance number was released and data showed the deficit stood at Rs 4.51 lakh crore, or 25.3% of annual estimates. Total expenditure amounted to Rs 10.5 lakh crore during April-June 2023, which was 23.3% of the Budget Estimate.
Global Currencies
Gains for the greenback was led by better-than-expected private payrolls numbers from the US. Data showed the private payrolls increased by 324,000 jobs last month after surging by 455,000 in June. Dollar surged against its major crosses after the release of robust data. This built up expectation of a robust non-farm payrolls number that was released on Friday.
Non-farm payrolls data showed the economy added 187,000 in July as compared to expectation of 200,000 job addition. But, on the other hand, the unemployment rate fell 3.5% in July as compared to 3.6% in the previous month. Average hourly earnings also came in higher at 0.4% in July as compared to 0.3% in the previous month. The dollar retraced after surging earlier in the week. This week, from the US, inflation and trade balance numbers will be important to watch; better-than-expected economic data could extend gains for the dollar.
Euro and pound, both these currencies were under pressure and the latter was more volatile than the former ahead of the Bank of England policy statement. The BoE raised rates by another 25bps and warned that its fight against inflation may require tighter borrowing conditions for an extended period. In its forecast report the BoE expects inflation to drop to 4.9% but inflation still remains elevated and that is building expectation that rates in the near future could remain higher.
Unemployment rate is expected to inch higher to 4.8% by 2024, higher from the previous forecast of 4.4% in May. This week, from the UK, GDP and trade balance number will be important to watch. We expect the GBPUSD to trade with a marginally negative bias and quote in the range of 1.2620 and 1.2880.
(Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services. Views expressed are the author’s own. Please consult your financial advisor before investing.)