Evening Report- Jul 13.

The Rupee pared loses and bounced from a two-month low in line with the trend in stock that also recovered partially. Currency closed at 49.08 levels. The dollar started to give back its gains as risk appetite returned during European trading but growth concerns has continued to generate support for the greenback. The economic calendar is relatively empty today with only the monthly budget ahead which is expected to show a -$86 billion as budget cuts pare spending. The main focus this week will be on the beginning of earnings season with Goldman Sachs, IBM and GE highlighting the list of those reporting. The concern is that we will see companies report modest gains as the benefits from their cost cutting start to dissipate. U.S. retail sales latter in the week is expected to show a modest rise, but millions of jobs lost over the past year is expected to limit domestic demand going forward. Therefore, the prevailing uncertainty and growth concerns should continue to be a supportive factor for the dollar. The Euro continues to remain range bound and with an empty economic docket the single currency has volatility has been driven by risk sentiment. European stocks started the day lower but have flirted with positive territory which has provided some support for the single currency. Range bound movement is seen as the ECB remains on hold as they assess the impact of their cover bind purchase program. The central bank is reluctant to go lower and it would take a shift in expectations for them to take the aggressive action. President Trichet has maintained that deflation isn’t a concern and that growth is expected to rerun by mid 2010. However, there are concerns that the troubles of the developing nations in Eastern Europe could have a weighing factor on the economy and increase the downside risks to growth. German Zew this week will present the most significant event risk. Sentiment indicators indicate that optimism is abating which would add weight to the single currency. The pound ran into resistance at 1.6363 as growth concerns and expectations that the BoE will add to their quantitative easing efforts at their August meeting when they release their quarterly inflation report. Tomorrow’s CPI report is forecasted to show inflation falling below the MPC’s 2% target to 1.8% which will increase speculation for the expansion . The central bank has maintained that prices will fall below their target and remain there for the remainder of 2009 which could threaten any growth prospects and derail any potential recovery. Japanese yen gained a little ground on their major rivals finding support as an uncertain outlook for equities increased the safe-haven appeal of lower-yielding currencies .Currency tested a low of 91.80 which would likely be triggered by a weakening macroeconomic outlook as well as deteriorating corporate earnings.