USD/INR: Rupee forecast as Fed and RBI point to divergence

July 06, 2023 01:15 AM PDT | By Invezz

USD/INR: Rupee forecast as Fed and RBI point to divergence — Image source: Invezz

Hawkish Fed minutes

The USD to INR exchange rate jumped after the latest Fed minutes. These minutes, which were published on Wednesday, showed that the bank was committed to more gradual rate hikes to fight the elevated inflation.

Data published in June showed that the headline consumer price index (CPI) dropped to 4% in May. Core inflation, which excludes the volatile food and energy prices, dropped at a gradual pace, hitting 5.6%.

Therefore, most Fed officials believe that more rate hikes are necessary to fight against this inflation. Still, the Fed warned that these rate hikes, coupled with the tight liquidity in the banking sector, will lead to more slowdown of the American economy.

The most recent data have painted a rosy picture about the US. For example, the housing sector is doing well while the labor market remains tight. The US is also attracting many large manufacturers in the semiconductor and clean energy industries.

The next important catalyst for the USD/INR price will be the upcoming non-farm payroll (NFP). As I wrote in this article, most analysts believe that the labor market slowed down slightly in June. They expect that the economy added over 220k jobs while the unemployment rate remained at 3.7%.

While the Fed is expected to hike rates, analysts believe that the Reserve Bank of India (RBI) will either leave rates unchanged or cut them in the fourth quarter. India’s inflation is nearing the RBI’s target while there are signs of more economic slowdown. The most recent numbers showed the country’s inflation dropped to a 20-month low.

USD/INR forecast

USD/INR chart by TradingView

The 4H chart shows that the USD to INR exchange rate made a bullish comeback this week. As it rose, the pair moved above the important resistance level at 82.17, the highest point on June 20th of this year. It also jumped above the resistance level at 82.23 (June 1st low).

The USD/INR pair moved above the 25-day and 50-day moving averages. Therefore, the pair will likely continue rising as buyers target the next key resistance level at 82.50. A move above this level will bring the next level of 82.68 to view.

The post USD/INR: Rupee forecast as Fed and RBI point to divergence appeared first on Invezz.

Disclaimer

The content, including but not limited to any articles, news, quotes, information, data, text, reports, ratings, opinions, images, photos, graphics, graphs, charts, animations and video (Content) is a service of Kalkine Media LLC (Kalkine Media, we or us) and is available for personal and non-commercial use only. The principal purpose of the Content is to educate and inform. The Content does not contain or imply any recommendation or opinion intended to influence your financial decisions and must not be relied upon by you as such. Some of the Content on this website may be sponsored/non-sponsored, as applicable, but is NOT a solicitation or recommendation to buy, sell or hold the stocks of the company(s) or engage in any investment activity under discussion. Kalkine Media is neither licensed nor qualified to provide investment advice through this platform. Users should make their own enquiries about any investments and Kalkine Media strongly suggests the users to seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice), as necessary. Kalkine Media hereby disclaims any and all the liabilities to any user for any direct, indirect, implied, punitive, special, incidental or other consequential damages arising from any use of the Content on this website, which is provided without warranties. The views expressed in the Content by the guests, if any, are their own and do not necessarily represent the views or opinions of Kalkine Media. Some of the images/music that may be used on this website are copyright to their respective owner(s). Kalkine Media does not claim ownership of any of the pictures/music displayed/used on this website unless stated otherwise. The images/music that may be used on this website are taken from various sources on the internet, including paid subscriptions or are believed to be in public domain. We have used reasonable efforts to accredit the source (public domain/CC0 status) to where it was found and indicated it, as necessary.