Currency Market Snapshot For The Week
· INR depreciated by 0.60% against the USD last week and depreciated by 0.16% against the euro.
· USD rose by 0.66% on a week on week basis and is at a level of 99.73.
· The British pound depreciated by 0.77% against the USD
· Euro depreciated by 1.29% against the USD.
Global Bond Market Snapshot For The Week
· US 10-year benchmark bond yields rose by 7 bps last week.
· German 10-year bond yields rose by 5 bps, French 10-year bond yields rose by 8 bps.
· Italy’s 10-year benchmark yield rose by 7 bps to 1.83%.
· US benchmark Junk bond yields fell by 7 bps to 7.97%
INR ended the week lower against USD as risk appetite across the globe was weighed down by lingering tensions between the US and China. Additionally, weak economic data released during the week showed a sharp contraction in India’s economic activity in April. The IHS Markit services Purchasing Managers’ Index fell to an all-time low of 5.4 in April from 49.3 in the previous month. Similarly, the manufacturing Purchasing Managers’ Index fell to a record low of 27.4 from 51.8 in March.
However, on Friday, INR gained against the USD and managed to pare some of its early-week losses as the sentiment improves after China seems to be in the agreement to cooperate on the implementation of the first phase of the trade deal signed between the two countries in January. INR depreciated by 0.6% against the USD last week and depreciated by 0.16% against the euro.
USD traded higher last week as investors risk appetite soured amid dire global economic data, rising trade tensions, and concerns over the eurozone. USD Index (DXY), which tracks the movement of the USD against six major currencies, rose by 0.66% on a week on week basis and is at a level of 99.73.
USD started the week on a higher note but fell in the latter part of the week largely due to changing risk sentiment. On Monday, the market sentiment weakened sharply as the U.S.-China dispute was re-ignited, this time over the novel coronavirus. U.S. President Donald Trump and Secretary of State Mike Pompeo have pinned the blame for the pandemic on China, where the new coronavirus outbreak is believed to have originated.
Further, on Wednesday U.S. Secretary of State Mike Pompeo renewed his aggressive criticism of China, as the Trump administration weighs punitive actions against Beijing over its early handling of the virus outbreak.
President Donald Trump also said on Wednesday that he was closely watching to see if China is fulfilling its obligations under a Phase 1 trade deal the two countries signed in January before the coronavirus spread globally. However, on Friday Chinese Vice-Premier Liu He spoke to US Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer and pledged to cooperate on the implementation of phase 1 of the trade deal signed between the two countries in January.
Euro fell sharply against USD last week after a surprise ruling by a German court hurt confidence in the European Central Bank’s ability to manage the region’s economic recovery. ECB in its monetary policy left the door open to increasing stimulus that is now in doubt after the ruling from Germany’s constitutional court that the ECB must justify the necessity of its bond-buying program, even though Europe’s top court has ruled in favor of it.
Weekly Global Bond Market Analysis
US 10-year benchmark bond yields rose by 7 bps last week and is at 0.69% despite U.S. Labour Department reported that the U.S. lost 20.5 million jobs in April, a record decline though slightly less than the 21.5 million drop anticipated by the market participants.
Eurozone bond yields were largely up last week. German 10-year bond yields rose by 5 bps, France 10-year bond yields rose by 8 bps and is at negative 0.03%. Italy’s 10-year benchmark yields rose by 7 bps.
US benchmark Junk bond yield fell by 7 bps and is at 7.97%, Euro benchmark Junk bond yields rose by 14 bps to 5.77%.