June 18, 2024
New Delhi, India
USD/INR Faces Selling Pressure Ahead of US Retail Sales Data
The Indian Rupee (INR) is gaining ground against the US Dollar (USD) amid sales from state-run banks on Tuesday. However, the upward momentum for the INR might be limited due to the hawkish stance of the US Federal Reserve (Fed) and rising crude oil prices.
Key Market Factors
- State-Run Bank Sales: The INR is bolstered by USD sales from Indian state-run banks, contributing to the Rupee’s strength.
- Fed’s Hawkish Tone: The Fed’s cautious stance and the potential for future rate hikes are likely to keep the USD supported, which could limit INR gains.
- Crude Oil Prices: Rebounding crude oil prices may weigh on the INR, as India is one of the largest oil consumers globally, behind the US and China.
Upcoming US Retail Sales Data
Investors are closely watching the US Retail Sales data, due on Tuesday, which is expected to show a 0.2% month-on-month increase for May. Strong consumer spending data could boost the USD, exerting additional pressure on the INR.
Federal Reserve Influence
Several Fed officials, including Lisa Cook, Thomas Barkin, Adriana Kugler, Lorie Logan, Alberto Musalem, and Austan Goolsbee, are scheduled to speak later on Tuesday. Their comments could provide further insights into the Fed’s monetary policy outlook and impact the USD/INR pair.
Market Movements
- Rangebound INR: According to Dilip Parmar, FX research analyst at HDFC Securities, the Indian Rupee is expected to remain rangebound between 83.40 and 83.70 this week.
- RBI Intervention: Potential foreign exchange intervention by the Reserve Bank of India (RBI) might support the INR and limit the upside for USD/INR.
Economic Outlook
- India’s Growth: Moody’s projects that India will continue to be the fastest-growing economy in the Asia-Pacific region in 2024, driven by strong domestic momentum.
- US Economy: Philadelphia Fed President Patrick Harker indicated that the Fed might cut its benchmark interest rate if the US economy performs as expected. Cleveland Fed President Loretta Mester and Chicago Fed President Austan Goolsbee emphasized the need for more data confidence.
Recent Economic Data
- NY Empire State Manufacturing Index: The index recovered to -6.0 in June from -15.6 in May, better than the forecast of -9.0, but remains in contraction territory.
Investor Sentiment
According to the CME’s FedWatch Tool, investors see a nearly 62% chance of a rate cut from the US Fed on September 18.
Summary
The USD/INR pair is facing selling pressure ahead of the US Retail Sales data. While the INR gains support from state-run bank sales, its upside may be limited by the Fed’s hawkish tone and higher crude oil prices. Investors are closely monitoring the US Retail Sales data and upcoming Fed speeches for further market direction.
Disclaimer:
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