Rupee Faces Uncertain Path: Data & Fed Watch

**London: 12 February 2024 (TraderMade): **The Indian Rupee started the week with a cautious climb against the USD, but can it hold its ground? Upcoming inflation data from India and the US loom, promising smooth sailing or choppy waters.

Meanwhile, the Fed's tightening whispers could add extra turbulence. Buckle up as we navigate the key factors influencing the Rupee's journey and unveil what lies ahead!

The USDINR pair soared 0.11% to 82.95087 at about 07:38 AM GMT - compared to its Thursday, 8 February Close.

Key Takeaways

• Indian Rupee (INR) edges higher against the USD in subdued early trading on Monday.
• Most Asian markets remain closed for local holidays, limiting trading activity.
• Investors await India's CPI inflation data due at 12:00 GMT, a crucial sentiment driver.

Balancing Act: Supporting and Pressuring Factors

Upward Momentum

Anticipation of RBI rate cuts in the second half of 2024 supports INR. Expectations of easing inflation in India bolster confidence.

Downward Pressure

A recent RBI policy statement highlights concerns about high inflation tempering rate cut expectations. Robust US economic data and hawkish Fed rhetoric strengthen the USD, putting pressure on INR.

Data Spotlight: Unveiling the Inflation Picture

Inflation in Focus: Key Data to Shape Rupee's Fate

India's CPI

• Anticipated Ease: Eyes are on India's Consumer Price Index (CPI) data, expected at 12:00 GMT today. Forecasts predict a decline to 5.09% from 5.69% in December, offering some relief from inflationary pressures.
• Downside Risk: However, a higher-than-expected figure could dampen the Rupee's outlook. Increased inflation could push back expectations of rate cuts from the RBI, potentially weakening the currency against the USD.

US CPI

Global Impact: Tuesday's US CPI report will also be keenly watched. Analysts anticipate a slowdown from 3.4% to 3.0% in January.

Ripple Effect: Deviations from these forecasts could significantly impact global risk appetite. A higher-than-expected US inflation reading could strengthen the USD and put downward pressure on the Rupee. Conversely, a lower-than-expected outcome could trigger risk-on sentiment - which may benefit the Rupee.

Overall

India's and the US's inflation data hold significant weight for the Rupee's trajectory. A favorable outcome on both fronts could bolster the INR, while negative surprises could trigger depreciation. Stay tuned for further updates as these crucial data points are released.

Fedspeak in Focus: Gauging the Policy Tightening Path

• Statements from US Fed officials later this week will be closely monitored.
• Any shift in the tone towards faster or slower tightening could significantly impact INR sentiment.

Overall Summary

• The INR's initial gains reflect potential optimism on inflation and rate cuts.
• Key data releases from India and the US, combined with Fedspeak, will dictate the currency's trajectory.
• High inflation remains a risk for INR, while the Fed's tightening stance continues to influence global market sentiment.