India’s April inflation to crawl up again, troubles rupee

It is expected that India's headline CPI for April 2015 will likely print at around 5.21% YoY, a tad higher than the March CPI print of 5.17% YoY and well within the RBI's target of 6% by January 2016.

At this point in time, it seems that India's inflation has bottomed out. While we do not expect a major spike in headline inflation going forward, inflation may still inch up from here onward. We expect FY16 inflation to average around 5.5% YoY.

On the other hand, UK has mixed bag of news but positive notes comparatively. BoE keeps its official bank rate unchanged at 0.50% in April. The latest PMI survey has shocked the markets with a big slip from 54.0 to 51.9 in April but data due for release this week are for March so we caution against expecting a weak number. Also, Asset Purchase Facility remains unchanged at 375 bln for the month of April.

Sterling Pound is projected to trade sideways as markets to remain cautious ahead of Bank of England Quarterly Inflation data this week. Also, in its monthly policy announcement will add pressure on the currency. Overall, we anticipate pounds versus INR is likely to trade on the positive note on the back of BoE interest rate outlook.

Technicals and Derivatives Watch:

We don't see any harm on this pair as technicals on both daily and weekly charting suggests uptrend is still intact. RSI (14) and fast stochastic are sync with the price curves. Prices don't seem to be overextended even if they touch the upper Bollinger band. Both upper and downward bands are plotted around 20 day moving average and standard deviation on the either side covers expands or contracts based on the last 20days volatility of the script.

MCX GBPINR Derivative Forwards:

For the simple reason is that the rationale of price rising with increased OI (open interest) and volumes would usually suggest us the strong market, so trend is uptrend. Hence, trend is your friend, never buck the trend.

The prices of 27May2015, 26Jun2015 contracts are up with 1.51% and 1.48% in conjunction with relative increase in OI (open interest) of 4698 (up 6.63%) and 1153 (up 3.97%) respectively.

We recommend adding long positions on 1M, 3M forward exchange contracts of this pair as we saw this pair is still in bullish mood.