Indian Rupee: Upside CPI and RBI tightening risks – MUFG

FXStreet Insights Team FXStreet

MUFG’s Lloyd Chan flags India’s April Consumer Price Index (CPI) release as a key risk for the Indian Rupee (INR), with higher energy prices and a softer currency building inflation tailwinds. He sees upside risks versus the 3.8% consensus and warns this could force further Reserve Bank of India (RBI) tightening to contain inflation and support INR. Chan adds USD/INR could post its highest weekly close on record if these risks materialize.

Inflation risks and Rupee vulnerability

"India’s April CPI data is due today."

"Inflation tailwinds are building amid higher energy prices and a softer rupee, raising the risk that the RBI may need to tighten policy further to contain inflation and support the currency."

"We see upside risks to April CPI relative to the market consensus of 3.8%yoy."

"If such upside risks materialize, USD/INR could register its highest weekly close on record."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

GBP/USD trades below 1.3500 on firmer USD, ahead of UK GDP

The GBP/USD pair trades with a negative bias for the second consecutive day and trades below the 1.3500 psychological mark during the Asian session amid modest US Dollar strength. The downside potential, however, seems limited as traders might opt to wait for the UK macro data dump, including the Q2 GDP report, before placing directional bets.

EUR/USD advances as US Dollar weakens amid cooling Inflation

EUR/USD halts its three-day losing streak, trading around 1.1530 during the Asian hours. The currency pair gains ground as the US Dollar faces challenges following the release of July's Consumer Price Index report. Inflation in the US moderated across a broad range of goods and services, which significantly cooled expectations for an aggressive Federal Reserve rate hike in September.

Gold retreats from June 5 high amid oil-driven Fed rate-hike bets

Gold retreats after touching a fresh high since June 5, around the $4,450 area, during the Asian session, and is currently placed near the lower end of its daily range. The immediate market reaction to signs of moderating US inflation seems to have faded amid expectations that higher energy prices will rekindle inflationary pressures.

Ripple and Stellar outlook: Stay under pressure as cautious sentiment builds

Ripple and Stellar remain under pressure, with both altcoins correcting slightly so far this week. XRP nears the key $1.00 support zone on Thursday, while XLM trades below critical technical levels. Mixed derivatives and on-chain metrics suggest cautious sentiment, leaving both tokens vulnerable to further downside while offering hope for a potential recovery.

Gold has priced a Fed pause. The hike is still coming

July inflation landed exactly where the consensus had it, on all four lines of the release, and Gold responded by adding around 1% and holding fast near $4,400/ounce, trading at its highest since early June. A print that surprises nobody is not supposed to move a metal that far.

Why is Crude Oil priced for a reopening the ships haven't made?

Fourteen vessels crossed the Strait of Hormuz on Tuesday. Before the war, the count ran near 120 a day. In the sessions since the waterway was publicly declared open, Brent has drifted back to $87 and West Texas Intermediate (WTI) to $81, both a little lower again on Wednesday, with daily momentum on each unwound from the top of its range in late July to the low twenties now.