Interest rates

The ECB is likely to start raising interest rates shortly

USDINR: 77.58 ▲ 0.01%.

GBPUSD: 1.2419 ▼ 0.57%.

EURUSD: 1.0523 ▼ 0.23%.

Yield on 10-year Indian bonds: 7.355 ▼ 0.15%.

Yield on 10-year US bonds: 2.999 ▲ 0.97%.

Sensex: 54,208.53 ▼ 0.20%.

Clever: 16,240.30 ▼ 0.12%.

Highlights

Britain’s inflation jumped last month to its highest annual rate since 1982, urging FM to offer more aid to households and the BoE to keep raising interest rates despite the risk of recession. The CPI hit 9% in April, surpassing the highs of the early 1990s recession that many Britons remember for sky-high interest rates and widespread defaults.

The ECB will likely start raising interest rates soon after its bond-buying program ends at the start of the third quarter, with the potential for further hikes in the coming quarters, policymaker Pablo Hernandez said. of Kos.

S&P Global Ratings has cut India’s growth projection for the current fiscal year to 7.3% from 7.8% earlier due to rising inflation and the longer-than-expected Russian-Ukrainian conflict . In its global macroeconomic growth forecast update, S&P said inflation staying higher for a long time is a concern, forcing central banks to raise rates more than currently expected, risking a softer landing. difficult, including a greater impact on production and employment.

USD/INR Movement

USDINR opened at 77.55 levels. The pair traded in the 77.47-77.60 range. and closed the trading session at 77.58. The USDINR pair set a slightly higher trailing strength in the Dollar Index on expectations of more aggressive policy tightening from the Federal Reserve. The strong dollar and high crude prices also supported dollar demand today. However, the pair’s major gains were capped as the RBI would have protected the 77.50 levels. The markets seem convinced that the US central bank should take more drastic measures to control inflation. The bets were bolstered by remarks from Fed Chairman Jerome Powell at a Wall Street Journal event yesterday.

Global Currency Updates

The euro traded lower against the US dollar, following the dollar’s strength following hawkish comments from Fed Chairman Powell. Eurozone inflation rose 7.4% in April, on an annualized basis, according to Eurostat’s final reading of the Eurozone Harmonized Consumer Price Index report for the month. The reading disappointed expectations by 7.5% while against the previous 7.5%. Inflation data led to a slight weakening of the euro. GBPUSD was slightly lower after UK inflation data showed the headline CPI jumped to a 40-year high of 9% in April. Apart from that, the stalemate between the UK and the EU over the Northern Ireland Protocol has put further downward pressure on the British Pound.

Bond market

Yields on US Treasuries were marginally higher as market participants weighed inflation fears and the prospect of even tighter monetary policy. The yield on the benchmark 10-year Treasury bond rose, hitting a high of 3% earlier in the day. The domestic bond market traded sideways today as overall shifts in sovereign curve yields remained within 5 basis points. The benchmark G-sec 10-year closed the day at 7.355%.

Stock market

India’s benchmark Sensex and Nifty 50 stocks gave up initial gains in a volatile session, amid mixed moves in other Asian markets as investors weighed optimism over the easing of restrictions in China with aggressive rate hikes. Losses in real estate, IT and selective financial stocks offset gains in consumer durables and pharmaceuticals stocks. Broader markets mirrored moves in the flagship indices, with the Nifty midcap 100 and Nifty smallcap 100 indices ending the day lower. Investors were waiting for the latest leg of corporate earnings for clues.

evening sun

Focus on US building permit data.

European stocks were mixed as global markets struggled to gain momentum. U.S. stock futures fell, signaling that Wall Street’s nascent recovery could falter as market participants weigh hawkish comments from Federal Reserve Chairman Jerome Powell. The focus will be on US building permit data which is expected to be released later today.