The EU is willing to exempt some central European member states from its embargo on Russian oil

USDINR: 76.9150 ▲ 0.39%.

GBPUSD: 1.2338 ▼ 0.21%.

EURUSD: 1.0583 ▲ 0.41%.

India 10-Year Bond Yield: 7.451  ▲ 0.65%.

US 10-Year Bond Yield:  3.089  ▲ 0.68%.

Sensex: 54,836 ▼ 1.56%.

Nifty: 16,411 ▼ 1.63%.

Key highlights

The cost of living in Tokyo rose at the fastest pace in almost three decades in April, as the impact of soaring energy prices became clearer, an outcome that complicates the Bank of Japan’s messaging on inflation and the need for continued stimulus. Consumer prices excluding fresh food in the capital climbed 1.9% from a year ago, according to the ministry of internal affairs.

The European Union is willing to exempt some central European member states from its proposed embargo on Russian oil, hoping that the concessions will ensure the unanimity that is needed for the sanctions to come into force.

Oil prices climbed for a third straight session, shrugging off concerns about global economic growth as impending European Union sanctions on Russian oil raised the prospect of tighter supply.

USD/INR movement

The USDINR pair made a gap up opening at 76.62 levels. The pair remained volatile during the day and traded within the broad range of 76.55-76.9475. The pair closed the day at 76.9150 levels. The USDINR pair rose as rapid shifts towards higher interest rates by major central banks across the globe soured the outlook on emerging market assets, wreaking havoc on domestic equity and bond markets. The stronger dollar globally and elevated crude prices also dented the sentiment for the rupee.

Global currency updates

After bottoming out in the 1.0480 regions earlier in the session, the EURUSD pair managed to regain some buying interest and now reclaims the area further north of the 1.0500 barriers. Also lending some support to the shared currency, ECB’s Villeroy suggested that the bank’s policy rates could return to the positive territory by the end of the year. In the euro docket, Industrial Production in Germany contracted by a monthly 3.9% in March.

The GBPUSD pair has recovered modestly after having slumped to its weakest level in nearly two years below 1.2300 early today. The pair, however, is unlikely to stage a steady rebound in the near term after the Bank of England's dire recession warning yesterday. The bank also refrained from providing any details on the quantitative tightening plan, saying that they would unveil a plan at the August meeting. Hence, the fundamental outlook is likely to continue to favor the dollar over the pound, limiting the GBPUSD's gains to technical corrections.

Bond market

The 10-year U.S. Treasury yield rose, holding near its recent high at 3.07%, ahead of the release of a key payrolls report. The 10-year rate surged as high as 3.10% yesterday, its highest point since 2018. The yield on India’s 10-year benchmark government bond closed 5 basis points higher at 7.45% today as the yields continue to surge amid elevated crude oil prices, FII outflows, and RBI rate hike concerns.

Equity market

Indian equity benchmarks Sensex and Nifty 50 suffered sharp losses tracking a global sell-off after the BoE sent a stark warning that Britain risks a recession and inflation above 10% as it raised interest rates to their highest since 2009. All sectors on NSE were deep in the red, with financial, IT, realty, metal, and media shares being the biggest drag on the Nifty 50. Broader markets also bled. The Nifty midcap 100 fell 1.8% and its smallcap counterpart 2.5%. The Sensex lost 1.56% to close the day at 54,836 while the Nifty 50 erased 1.63% to settle at 16,411.

Evening sunshine

Focus to be on the US nonfarm payrolls and unemployment rate data.

European stocks were on course for their worst week in two months following a carnage on Wall Street as investors feared that bigger interest rate hikes would be needed to tame decades-high inflation. US stock futures fell, putting major indexes on track to extend losses after one of the worst-selling on Wall Street since the pandemic began. Investors were waiting for data on the state of the labor market, a strong point for the US economy as the unemployment rate approached a 50-year low. This also led to higher wages which added to inflationary pressures.