- USD/INR grinds higher after rising the most in six weeks the previous day.
- Hawkish Fedspeak, fears surrounding China challenge traders ahead of long weekend in India.
- Indian CPI is likely to have eased in July but the distance from RBI’s target will be the key to watch.
USD/INR braces for Indian inflation around 79.65-70 during Friday’s Asian session, after rising the most since late June the previous day.
The market’s risk-aversion wave and no major positives at home propelled the USD/INR prices the previous day. However, cautious sentiment ahead of the Indian Consumer Price Index (CPI) for July and the first impressions of the US Michigan Consumer Sentiment Index (CSI) for August seems to restrict the quote’s latest moves.
Hawkish Fedspeak, despite the downbeat US inflation numbers, propelled the US Treasury yields and favored the USD/INR buyers the previous day.
On Thursday, the US Producer Price Index (PPI) for July tracked the headline Consumer Price Index (CPI) while easing to 9.8% YoY versus 11.3% prior and 10.4% market forecasts, the data published by the US Bureau of Labor Statistics revealed. Details suggest that the monthly PPI dropped to the lowest levels since May 2020, to -0.5% compared to 1.0% expected and 0.2% prior, which in turn signaled more easing of inflation fears. Elsewhere, US Initial Jobless Claims eased to 262K for the week ending August 6 versus 263K expected and downwardly revised 248K prior.
However, the Fed policymakers resist cheering the latest weakness in price pressure as San Francisco Fed President Mary Day recently backed opportunities of witnessing another 75 basis points (bps) of a rate hike in September, while also suggesting an upfront 0.50% rate hike to be sure. Previously, Minneapolis Fed President Neel Kashkari and Chicago Fed President Charles Evans sounded grim. That said, Fed’s Kashkari mentioned that he hasn't "seen anything that changes" the need to raise the Fed's policy rate to 3.9% by year-end and to 4.4% by the end of 2023. Further, Fed policymaker Evens stated, “The economy is almost surely a little more fragile, but would take something adverse to trigger a recession.” Fed’s Evans also called inflation "unacceptably" high.
Elsewhere, firmer oil prices also weighed on the USD/INR prices, due to India’s reliance on energy imports and record high Current Account Deficit (CAD). WTI crude oil prints a 0.30% intraday loss at around $93.00, snapping a three-day uptrend, amid downbeat demand forecasts for 2022 by the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA), published on Thursday, appear to weigh on the quote. Before that, a softer US dollar appeared to have helped the black gold prices.
On a different page, US President Joe Biden’s pause in announcing tariff relaxations to China, actually the removal of the Trump-era tariffs, gain major attention and renew the Sino-US tussles to weigh on the market sentiment. Additionally, a jump in the coronavirus cases from China also propels the USD/INR pair. Furthermore, Taiwan’s criticism of the “One China” policy and US House Speaker Nancy Pelosi’s support for Taipei acts as an extra flavor to the pair buyers.
Amid these plays, Wall Street began Thursday on a positive side before closing mixed while the US 10-year Treasury yields rallied 10 basis points (bps) to 2.88% at the latest. It’s worth noting that the S&P 500 Futures remains indecisive at around 4,215 and the US Treasury yields remain firmer by the press time.
Moving on, USD/INR traders should pay attention to the Indian CPI data for July, expected 6.78% versus 7.01% prior, for fresh impulse. India's retail inflation likely eased in July due to a fall in food and fuel prices yet stayed well above the Reserve Bank of India's upper tolerance limit for a seventh consecutive month, a Reuters poll found ahead of the data release.
Following that, US Michigan Consumer Sentiment Index (CSI) for August, expected at 52.5 versus 51.5 prior, will be important to watch for clear directions.
Also read: Michigan Consumer Sentiment Index Preview: Good news for the dollar but not for households
Technical analysis
A daily closing beyond the monthly resistance line, now support around 79.50, keeps USD/INR buyers hopeful of reaching the 80.00 threshold one more time.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD holds above 1.0700 ahead of key US data
EUR/USD trades in a tight range above 1.0700 in the early European session on Friday. The US Dollar struggles to gather strength ahead of key PCE Price Index data, the Fed's preferred gauge of inflation, and helps the pair hold its ground.
USD/JPY stays above 156.00 after BoJ Governor Ueda's comments
USD/JPY holds above 156.00 after surging above this level with the initial reaction to the Bank of Japan's decision to leave the policy settings unchanged. BoJ Governor said weak Yen was not impacting prices but added that they will watch FX developments closely.
Gold price oscillates in a range as the focus remains glued to the US PCE Price Index
Gold price struggles to attract any meaningful buyers amid the emergence of fresh USD buying. Bets that the Fed will keep rates higher for longer amid sticky inflation help revive the USD demand.
Sei Price Prediction: SEI is in the zone of interest after a 10% leap
Sei price has been in recovery mode for almost ten days now, following a fall of almost 65% beginning in mid-March. While the SEI bulls continue to show strength, the uptrend could prove premature as massive bearish sentiment hovers above the altcoin’s price.
US core PCE inflation set to signal firm price pressures as markets delay Federal Reserve rate cut bets
The core PCE Price Index, which excludes volatile food and energy prices, is seen as the more influential measure of inflation in terms of Fed positioning. The index is forecast to rise 0.3% on a monthly basis in March, matching February’s increase.