What’s going on here?
The Indian rupee and government bonds are under pressure following an assassination attempt on former US President Donald Trump, which spooked investors into seeking safe haven assets.
What does this mean?
The incident involving Trump has ramped up market volatility, driving demand for the US dollar and other safe haven assets while hitting emerging market currencies like the Indian rupee. The rupee closed at 83.5350 against the dollar and is expected to fluctuate between 83.35 and 83.65 this week. Historically, Trump’s influence tends to boost the dollar, so this incident might further support those trades. Despite this, the Reserve Bank of India is likely to step in to prevent sharp depreciation. Investors are also keenly watching Fed Chair Jerome Powell and US retail sales data, as last week’s lower-than-expected inflation reading fueled bets on potential rate cuts.
Why should I care?
For markets: Navigating new waves of unpredictability.
The rupee’s performance is likely to stay rangebound until the federal budget announcement on July 23. The 10-year government bond yield, ending at 6.9882% on Friday, is expected to move within the 6.96%-7.02% range this week. Despite foreign investors purchasing about $2 billion worth of Indian debt and equities in July, bond yields remain flat, partially due to lower-than-expected foreign inflows despite India’s inclusion in JPMorgan’s emerging market debt index.
The bigger picture: Global ripples from US political turmoil.
Key events that could impact markets include India’s June WPI inflation data, US retail sales, housing starts, and industrial production data, and the ECB’s monetary policy decision. These events come amid high market sensitivity to any political and economic developments, underscoring the interconnectedness of global markets. As the situation unfolds, investor strategies will likely hinge on these crucial data points and geopolitical stability.
