- USD/INR is confidently defending its immediate support of 81.70 despite a weak USD Index and a nosedive move in the oil price.
- A minor recovery in the S&P500 futures could be a dead cat bounce move as US equities were heavily beaten on Tuesday.
- Rising concerns over the US debt ceiling have heavily weighed on Treasury yields.
The USD/INR pair has rebounded after dropping to near 81.70 in the Asian session. The major has defended its downside despite weakness in the US Dollar Index (DXY) amid debt ceiling woes and a bloodbath in the oil price.
S&P500 futures have added some gains in Asia, which could be a dead cat bounce move as US equities were heavily beaten on Tuesday. Rising concerns over the US debt ceiling weigh heavily on S&P500. A stretch in the US debt ceiling would attract a downgrade rating for the US long-term outlook.
Meanwhile, the USD Index has corrected sharply to near 101.70 after commentary from Heather Boushey, member of the Council of US Economic Advisers that interest rate hikes from the Fed were having a negative impact on the banking sector, as reported by Reuters. This could force Fed chair Jerome Powell to remain neutral on interest rate guidance as a 25 basis points (bp) rate hike is widely anticipated.
Rising concerns over the US debt ceiling have heavily weighed on yields as US Treasury would be out of funds in early June if the White House failed to raise the debt ceiling sooner. The 10-year US Treasury yields have dropped to near 3.43%.
Apart from the Fed policy, investors will also focus on the US Automatic Data Processing (ADP) Employment data. As per the consensus, the US economy added 150K fresh jobs in April, higher than the former additions of 145K.
The Indian rupee has failed to capitalize on upbeat S&P PMI data (April). Manufacturing PMI rose to 57.2, highest print in four months. Services PMI accelerated sharply to 62.0 from the prior release of 57.8.
On the oil front, oil prices have turned sideways around $71.50 after a nosedive move as Western central banks are preparing for a fresh rate hike cycle. Apart from the Fed, the European Central Bank (ECB) will raise interest rates on Thursday. Next week, the Bank of England (BoE) is expected to raise interest rates further to curb inflation.
It is worth noting that India is one of the leading importers of oil in the world and lower oil prices will support the Indian rupee.
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