- The Indian Rupee experienced a decline in value during the early European trading session on Thursday.
- Weaker-than-anticipated retail inflation figures in India have heightened expectations of further interest rate reductions by the Reserve Bank of India (RBI), placing downward pressure on the INR.
- Market participants are keenly awaiting the release of US Retail Sales and Producer Price Index (PPI) data for April, scheduled for later today.
The Indian Rupee (INR) weakened in trading on Thursday. The primary driver behind this depreciation is the unexpectedly low retail inflation data emanating from India. Inflation has decelerated to levels not seen since July 2019, increasing the likelihood of the Reserve Bank of India (RBI) implementing additional rate cuts at its upcoming monetary policy meeting next month. This prospect of further monetary easing is weighing on the Indian currency. The latest inflation figures showed a significant drop, prompting analysts to reassess their expectations for the RBI’s near-term policy stance.
However, several factors are providing a degree of support to the Indian currency, mitigating the downward pressure. These include the easing of trade tensions between the United States (US) and China, a decline in Crude oil prices, which benefits India as a major oil importer, and a general softening of the US Dollar (USD). The interplay of these factors creates a complex environment for the INR. Looking ahead, currency traders are focusing on the release of crucial US economic data scheduled for later in the day, specifically the Retail Sales and Producer Price Index (PPI) figures for April. These data points will provide insights into the health of the US economy and potentially influence the Federal Reserve’s monetary policy decisions. Furthermore, Federal Reserve (Fed) Chair Jerome Powell is slated to deliver a speech later today, and his remarks will be closely scrutinized for any hints regarding the future direction of US monetary policy. Any hawkish signals from Powell could strengthen the USD and further pressure the INR. The market consensus anticipates a moderate increase in US Retail Sales, while the PPI is expected to show a slight rise in inflationary pressures at the producer level.
