- The Indian Rupee is trading with a negative bias in the early European trading session on Tuesday.
- Renewed optimism surrounding US-China trade negotiations is providing support to the US Dollar, subsequently weighing on the INR.
- Market participants are keenly awaiting the release of both Indian and US Consumer Price Index (CPI) reports, scheduled for release later today.
The Indian Rupee (INR) is weakening on Tuesday, facing downward pressure from a strengthening US Dollar. Positive signals emanating from ongoing trade discussions between the United States and China are bolstering the US Dollar (USD), which in turn is negatively impacting the Indian currency. Furthermore, escalating tensions in the India-Pakistan region could be contributing to selling pressure on the INR. Geopolitical risks often lead investors to seek safe-haven assets, further diminishing demand for emerging market currencies like the Rupee.
However, the resumption of Indian equities purchases by foreign portfolio investors (FPIs) could offer a degree of support to the INR. Increased foreign investment typically strengthens a currency by increasing demand. Looking ahead, investors are primarily focused on the Indian Consumer Price Index (CPI) data for April, which is scheduled for release later in the day. This data will provide insights into the current inflationary pressures within the Indian economy and potentially influence the Reserve Bank of India’s (RBI) monetary policy decisions. Concurrently, the US CPI inflation report will also be released. Market consensus anticipates the headline CPI to show an increase of 2.4% year-over-year (YoY) for April, while the core CPI, which excludes volatile food and energy prices, is projected to indicate a rise of 2.8% YoY for the same reporting period. These US inflation figures will be closely scrutinized by the Federal Reserve as they assess the trajectory of inflation and its implications for future interest rate adjustments. Any deviation from these expected figures could trigger significant market volatility. The market is also pricing in expectations for future rate cuts by the Federal Reserve, and the CPI data will be crucial in shaping these expectations.
