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USD/INR forecast: outlook ahead of US and India inflation data

By: Invezz
RBI India Bonds Move And Investors Unhappy

The USD/INR exchange rate retreated slightly ahead of a relatively busy market week in the market. The pair was trading at 83 on Friday, a few points below last week’s high of 83.22.

Indian and US economic data

The USD to Indian rupee rate retreated as investors watched the successful G20 meeting in India. The meeting welcomed leaders from most members except from China and Russia.

Looking ahead, the pair will be in the spotlight as the US and India are set to publish several important data. The first report will come from India, where the statistics agency will publish the latest inflation data on Tuesday.

Economists polled by Reuters expect the data to show that the headline CPI dropped from 7.7% in July to 7.0% in August. If this is accurate, it will signal that the Reserve Bank of India (RBI) will maintain its rates at the current level.

India will also publish the latest industrial and manufacturing production data. With India’s economy recovering at a fast pace, analysts expect the report to show that the two figures rose in July.

India’s economy has been a key bright spot globally this year. Most analysts expect it to grow by more than 7%, making it the fastest-growing major economy. China is expected to expand by less than 5% this year.

The other catalyst for the USD/INR pair will be the upcoming US inflation and retail sales numbers scheduled for Wednesday and Thursday, respectively. These numbers will help investors predict what the Fed will do in its September meeting.

Economists believe that the headline inflation firmed in August as it rose from 3.2% to 3.4%. They see the closely watched core CPI falling from 4.7% to 4.2%. The report will come a few days after several Fed officials pointed to a pause in this month’s meeting.


USD/INR chart by TradingView

The USD to rupee exchange rate lost its bearish momentum last week as India hosted its G20 meeting. It dropped from a high of 83.20 to a low of 82.87. As it retreated, the pair moved below the 25-period volume-weighted moving average (VWMA). It also seems like it has formed a double-top pattern at 83.20. 

Therefore, I suspect that the pair will continue falling in the near term as sellers attempt to retest the support at 82.80. The alternative is where the dollar strength pushes it above the double-top point at 83.20, opening the possibility of it rising to 83.42, the highest point in August.

The post USD/INR forecast: outlook ahead of US and India inflation data appeared first on Invezz.

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