Euro vs USD 25.11.17 - Moving Up?

Statistics as on 25.11.2017
Description	Currency	Values
USD vs INR		64.67
Euro vs INR		77.16
Euro vs USD		1.193
Gold / 10 gram	INR	29,373
Sensex		33,679
Crude Oil WTI (NYMEX)	USD	58.97



There has been a sharp appreciation of Euro against the US Dollar, hitting a 2 months high against the US DOllar.  Is the Euro set to scale new heights against the US Dollar before the end of this year?

 



Euro vs US Dollar



The answer is yes, with business confidence high in Euro zone especially in Germany & with a solution in sight for formation of new Government in Germany, Euro is set to move up further.  Munich based IFO institute in its press release on Friday says "The ifo Business Climate Index rose to a new record high of 117.5....This was due to far more optimistic business expectations.....The German economy is on track for a boom. The latest figures indicate economic growth of 0.7 percent in the fourth quarter, pointing to growth of 2.3 percent for 2017 as a whole. "  There has also been bullish actions on all major stock exchanges in Europe through the week (France, Germany, Spain).

The US Dollar is also not helping itself and it is extending losses against major currencies including Euro mainly due to concern of low inflation and consequent delays in rate increase.

Euro will cross 1.20 if sentiments in Europe and political situation (especially Germany) continues to improve

Data 06.11.2017

Statistics as on 06.11.2017
Description	Currency	Values
USD vs INR		64.61
Euro vs INR		74.81
Euro vs USD		1.161
Gold / 10 gram	INR	29,353
Sensex		33,731
Crude Oil WTI (NYMEX)	USD	57.35

Oil is in a tailspin especially after the high profile arrests in Saudi Arabia last Saturday night.  Crude Oil WTI at NYMEX is trading at a 2 year high of $ 57.35, Expectations are that oil prices will move up and some analysis say it will get to see $ 62 soon.  Brent crude already is above $ 62 and OPEC is already thinking about $70 a barrel. 



India is bracing up for trouble as oil prices increased by 10% already in 2017.  With oil prices moving up there is going to be pressure on pricing & taxes as Government will be forced to reduce taxes to bring down impact of global oil price increase to the common consumer & the oil dependent industry especially the transport sector.  This will exert pressure on fiscal & monetary policy of the government especially at a time when the government has announced a Rs.7 lakh crore stimulus to bail out banks and build infrastructure.  At a time when GDP growth is below expectations at 5.7% increase in global oil prices will trigger inflation (estimated WPI inflation to go up by 1.3% for every $10 increase in oil per barrel), reduce forex reserves exert pressure on Rupee and more importantly increase deficit as tax reduction will reduce tax revenues.  Already difficulties due to demonetisation & GST are plaguing the economy and oil price rise is becoming a new headache for the Government. 

The next victim of higher price increase will be the INR which is currently stable around 64 to the USD, will be under severe pressure as every $1 increase in oil price will increase imports bill by $ 1.2 billion annually.  Already forex reserves for the past 2 weeks are falling there will be further pressure on reserves as RBI will sell more dollars to keep INR rates stable in the short and medium term.

Liquidity is leading to boom in the stock market and currently it is at record levels of 33,000. 

Oil price increase will tend to suck out liquidity in the market and there predictions that stock market will reverse its growth and will be under strain soon, hurting industrial growth which is already hampered with slow growth.

Overall a big challenge faces India economy smart fiscal & monetary policy initiatives are a need of the day today to make best of this challenge

Data - 05.11.17

Statistics as on 05.11.2017
Description	Currency	Values
USD vs INR		64.55
Euro vs INR		74.95
Euro vs USD		1.161
Gold / 10 gram	INR	29,083
Sensex		33,685
Oil	USD	55.82

Dollar staged a smart recovery and ended at a six week high, mainly due to rally in stock markets and unwinding of positions of exporters.  Further contributions seems to have come from RBI where foreign exchange reserves fell by $ 1.560 billion during the last 2 weeks (Current reserve is $ 398.761 billion), the drop in reserve seems to have stemmed from the fact that RBI has intervened in the currency market and sold Dollars.  Dollar is forecasted to be at 64.50 at end of 2017.  Euro is forecasted to be at 74.40 at end of 2017.