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13/09/24
109
Indian Rupee Set for Gains Amid U.S. Rate Cut Speculation and Rising CPI
The Indian Rupee is showing signs of potential appreciation as recent economic indicators from the United States heighten expectations for a substantial interest rate cut by the Federal Reserve. Current market sentiment suggests a 41% probability of a 50 basis points cut during the Fed’s upcoming meeting, a significant shift from prior estimates which placed this likelihood at just 14%.
In India, the Consumer Price Index (CPI) recorded a rise of 3.65% in August, surpassing forecasts of 3.55% and slightly above July’s rate of 3.54%. This increase is largely attributed to surging vegetable prices. There are indications that the Reserve Bank of India may have intervened in currency markets to sustain the Indian Rupee, preventing it from slipping beyond the critical level of 84.00. Market participants are also awaiting forthcoming reports on the country’s trade deficit and foreign exchange reserves.
At a recent forum, the Governor of the Reserve Bank of India expressed optimism about the nation’s growth potential, estimating it could exceed 7.5% — a figure that is slightly above the central bank’s own forecast of 7.2% for the year 2024. Meanwhile, U.S. economic data revealed a month-on-month increase in the Producer Price Index (PPI) of 0.2% for August, which exceeded predictions of a 0.1% rise.
Contrarily, the latest U.S. Consumer Price Index dipped to an annual rate of 2.5% for August, down from 2.9%, falling short of expectations of a 2.6% figure. In India, industrial output showed a modest increase of 4.8% in July, reflecting a growth trend that defied earlier market predictions of 4.7%.
Technical insights into the USD/INR exchange rate show it hovering around 83.90, following a breakdown from a symmetrical triangle pattern, suggesting a bearish sentiment. This could potentially lead the pair to retest its recent six-week low of 83.72, with further psychological support expected at 83.50. Immediate resistance is anticipated around 83.91, consistent with the triangle’s boundary, while a breakthrough beyond 84.00 may encourage further upward movement toward prior highs.
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