Beyond tariffs, this week’s notable data releases include the U.S. second estimate for Q1 GDP and April’s US PCE inflation data, along with consumer confidence figures from both the U.S. and the Euro Area. Markets will also closely watch the FOMC meeting minutes and speeches from various Fed officials for clues on future rate cuts.
On the domestic front, India’s Q4 FY25 GDP (HDFC estimate: 6.8%) and the full-year FY25 provisional GDP estimate (HDFC: 6.3%) are due Friday. April’s industrial production data is scheduled for Wednesday (HDFC estimate: 3.2%
USD/JPY: The pair appreciated over 1% to close at 142.54 on Friday, driven by safe-haven buying following tariff threats. There are concerns that the recent strength of the yen could tighten financial conditions in Japan, and, along with rising inflation, might delay rate hikes from the Bank of Japan. Traders will await BoJ governor Ueda’s speech on Tuesday for more insights on chances of a rate hike in Japan over the coming quarter.
Euro: The EUR/USD pair strengthened on weaker dollar to end at 1.136 levels on Friday compared to its previous close of 1.128. The extension of EU tariff back to the original 9th July deadline supported the Euro, with the EUR/USD pair trading above 1.14 levels in early Asia trade at the time of writing.
Rupee: The USD/INR pair rallied by 0.92% on Friday to end at 85.21 levels, after it closed below 86 levels on Thursday. The rupee was supported by broad-based gains in emerging market currencies against the dollar. This week, rupee could record some gains against a weakening dollar and could trade with mild appreciation bias. We expect the USD/INR pair to trade in the range of 84.50 – 85.50 this week.
India 10Y yield: The India 10-year yield eased marginally to 6.21% on Friday, from Thursday’s close of 6.23%, helped by expectation of a large dividend transfer and expectation of further monetary easing by the RBI. While the lower-than-expected dividend announcement might lead to some upward pressure on yields, we expect these pressures to be short-lived.
Domestic system liquidity: System liquidity stood at a surplus of INR 0.99 lakh crore on 22nd May 2025. System liquidity is likely to increase substantially following RBI’s dividend transfer announcement of nearly INR 2.69 lakh crore last Friday, as the government begins to drawdown its cash balances and increase spending.