The impact of QE3 announces by US Fed will have its impact on all commodities leading to inflationary condition and may be interesting to see how Central Banks all around the World will manage Growth vs. Inflation.
Euro which kept rising from the level of 1.21 till recently and touched 1.32 on the support of ECB stimulus and other positive news has started falling again as the Euro Zone crisis keep hunting.
The trade relationship between China and Japan has touched its lowest level since last so many years due to the disputes over the ownership & control of an Island
Indian Rupee has appreciated strongly against USD and has touched 53.40 level and very close to the last 200 days moving average of 53.10. Once this level is breached there is strong likely hood of rupee touching 52 level and 50 by the end of December. All depends upon the political stability of central Government which seems comfortable at present due to the support of two politician of Uttar Pradesh. The other factors are the way disinvestment process is carried out by the Central Government and how the Crude price behaves post QE3. 1 year forward rate has also come below 320 levels
Even if the liquidity condition of Banks is pretty comfortable RBI cut the CRR by 25 bps and gives additional liquidity. The expectation is that Banks will cut the Base rate. SBI was the first Bank to cut its Base rate after the CRR cut and more Banks may follow. After the recent fuel price hike it will be difficult for RBI to cut Repo rate in the near future.
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