Currency Market Snapshot For The Week
· INR depreciated by 0.03% against the USD last week and appreciated by 0.04% against the euro.
· USD rose by 0.67% on a week on week basis and is at a level of 100.40.
· The British pound depreciated by 2.37% against the USD
· Euro depreciated by 0.18% against the USD.
Global Bond Market Snapshot For The Week
· US 10-year benchmark bond yields fell by 4 bps last week.
· German 10-year bond yields remained flat at negative 0.54%, French 10-year bond yields rose by 1 bps.
· Italy’s 10-year benchmark yield rose by 3 bps to 1.86%.
· US benchmark Junk bond yields rose by 16 bps to 8.13%
INR ended the week marginally lower against USD as market participants were worried about the impact of the coronavirus pandemic on India’s macroeconomic fundamentals after the Centre said it will have to borrow an additional Rs 4.20 trillion in 2020-21. However, INR received some support from the economic stimulus packages worth Rs 20 trillion announced by Prime Minister Narendra Modi on Tuesday. INR depreciated marginally by 0.03% against the USD last week and appreciated marginally by 0.04% against the euro.
USD ended the week higher against major world currencies after Federal Reserve Chair Jerome Powell delivered remarks on Wednesday in which he said that an “extended period” of weak growth may be in store for the United States and also rejected the idea of using negative interest rates as a stimulative tool.
Last week there has been a lot of uncertainty in the global currency market. On one hand, market players were jittery over rising trade tensions between the US and China, and on the other, businesses in the US are reopening after being shut from mid-March due to the coronavirus. Additionally, concerns over the second wave of coronavirus cases in China, South Korea, Germany, and the state of Texas in the US also kept market participants nervous through out the week.
USD Index (DXY), which tracks the movement of the USD against six major currencies, rose by 0.67% on a week on week basis and is at a level of 100.40.
British Pound depreciated by 2.37% against USD last week amid growing fears that the Bank of England will be forced to resort to negative rates. Further, the fear of a hard Brexit at the end of the year when the current transition period ends also kept pound under pressure.
Weekly Global Bond Market Analysis
US 10-year benchmark bond yield fell by 4 bps last week and is at 0.64% amid doubts that even after COVID-19-related lockdowns are dismantled, the economic bounce may be more gradual or weaker than assumed. In U.S. economic data, weekly jobless claims rose by 2.6 million in the week ended May 9, slightly lower than an expectation of 2.7 million.
U.S. economy consumer spending has come to a halt. Retail sales fell 16.4% in April, marking its biggest slump on record. The Empire State business conditions index showed factory activity in New York State slumped to a reading of negative 48.5 this month, the second-lowest level on record.
Eurozone bond yields were largely flat last week. German 10-year bond yields was flat at negative 0.54%, France 10-year bond yields rose by 1 bps and is at negative 0.03%. Italy’s 10-year benchmark yields rose by 3 bps.
US benchmark Junk bond yield rose by 16 bps and is at 8.13%, Euro benchmark Junk bond yields rose by 13 bps to 5.90%.