ALL EYES ON THE US-IRAN TRUCE

ALL EYES ON THE US-IRAN TRUCE

The 14-point proposal given by Iran to the US is being currently reviewed by Trump. It includes demands for withdrawal of sanctions, end to hostilities, future guarantees, reparations, control over Hormuz Straits, and the leeway to pursue Iran’s peaceful nuclear agenda. The last part of the demand may be slightly irrational and unacceptable to the US.

What the markets are betting on is that the continuing ceasefire is proof that neither side really wants the war to continue. For Iran a war means more losses, and for the US a long war is a source of embarrassment on the global stage. The optimism was evident in the way Brent Crude prices tapered in the latter half of the week after spiking sharply earlier.

US BOND YIELDS INCH UP ANOTHER 7 BPS THIS WEEK

Key takeaways on US bond yields data:

The week again saw US bond yields up 7 bps from 4.310% to 4.378%

With the Fed holding rates last week, rate cuts look unlikely for now

US bond yields are closely tracking the language of Kevin Warsh who will take charge

FOMC vote showed discomfort; due to rate action not reflecting inflation trajectory

For the week; US 10-year bond yields scaled a high of 4.436% and a low of 4.306%.

US DOLLAR INDEX (DXY) WEAK IN A TIGHT RANGE

Key takeaways on US Dollar Index data:

The 100 level on DXY looks to be elusive for the time being

For the week, the dollar index fell from 98.53 levels to 98.16

Markets do not expect Kevin Warsh to deviate from the cautious monetary stance

The 14% correction in Dollar Index continues to weigh on the US dollar

For the week, US dollar index (DXY) touched a high of 99.09 and a low of 98.01.

INDIA BOND YIELDS SHARPLY UP ON INFLATION FEARS

Key takeaways on India Bond Yields data:

For the week, India 10-year yields surged from 6.933% to 7.018%

Language of MPC minutes has almost ruled out any rate cut possibility

Markets expect inflation to manifest after state election results

FPIs continue to be net sellers in debt, apart from equities; pulling up yields

For the week, India Bond Yields touched a high of 7.070% and a low of 6.932%.

RUPEE (USDINR) CROSSES 95/$ MARK DURING THE WEEK

Key takeaways on USDINR data:

The Indian rupee weakened further from ₹94.250/$ to ₹94.905/$ for the week

FPIs net sold equities of $1.8 billion in the week, putting pressure on the rupee

The spike in Brent Crude to $126/bbl also weakened the Indian rupee

The rupee gains post the RBI speculative curbs have now been fully wiped out

Rupee continues to be vulnerable to geopolitical risks. For the week, the USDINR touched a high of ₹94.103/$ and low of ₹95.337/$.

CRUDE OIL – SURGES SHARPLY IN SUPPLY CHAIN CONSTRAINTS

Key takeaways on Brent Crude Prices:

Brent Crude surged to $126.41/bbl this week, but closed at $108.17/bbl

Markets are keeping the faith that a US-Iran deal will finally be worked out

Concerns pertain to big crude drawdowns and delay in resuming capacities

Brent Crude is expected to settle at a new normal of above $90/bbl

For the week, Brent Crude touched a high of $126.41/bbl and a low of $105.82/bbl.

SPOT GOLD CLOSES LOWER AS RATE CUT HOPES RECEDE

Key takeaways on spot gold (XAU) price data:

After a volatile week, spot gold closed lower at $4,614.95/oz

FOMC minutes have almost ruled out rate cuts for now

Gold is still down -17.5% from its late January peak of $5,595/oz

India spot gold is currently trading at ₹1,53,696/10 grams

For the week, spot gold touched a high of $4,730.18/oz and low of $4,509.96/oz.

SPOT SILVER ENDS FLAT FOR THE WEEK

Key takeaways on spot silver (XAG) prices:

Silver ranged flat for the week from $75.6988/oz to $75.3610/oz

Strong dollar and low probability of rate cuts, have put a cap on silver prices

Spot Silver is still down -38.1% from its late January peak of $121.67/oz

India spot silver is currently trading at ₹2,51,750 / Kilogram

The Gold-Silver Ratio of 61.24X has stabilized at a lower new-normal range

For the week, spot silver touched a high of $76.974/oz and low of $70.860/oz.