Ind-Ra: Markets to Focus on Global Environment

The trajectory of global crude oil price, and the US Fed policy move will be the key drivers for both debt and currency markets during this week, says India Ratings and Research (Ind-Ra). The benchmark 10-year G-sec yield is likely to trade in the 7.42%-7.50% band for the week (7.46% at close on 22 April 2016) while the rupee is likely to hover in the range of 66.20-66.85/USD (66.48/USD at close on 22 April 2016) over the coming week.

Central Banks' Meetings to Determine Risk Preference: Ind-Ra believes the US Fed policy meeting (26-27 April 2016) will be crucial amid low expectations of a Fed rate hike while the economic data has been resilient. The sharp recovery in global oil price, sustained improvement in US labour markets, stability in the global financial market provide reasonable scope for a rate hike in the next policy in June 2016. Consequently, the communication of Fed will be critical this week. Additionally, Bank of Japan's policy move will also be instrumental to determine the balance of risks.

 

The global crude oil price has recovered to around USD45/bbl (48% up) presently from around USD30/bbl in mid-January. The rise in crude oil price may reduce the optimism of oil importing emerging economies on the fiscal and inflation fronts. At the same time, a sustained recovery in oil prices will be favourable for developed economies in terms of inflation. While the overall global recovery may remain tepid, it could be supportive for the global risk appetite.

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