USD/INR Price News: Rupee stays depressed ahead of India Fiscal Deficit, US Core PCE Inflation

• USD/INR grinds higher after bouncing off two-week low the previous day.
• Cautious mood ahead of the key data keeps Indian Rupee directionless.
• US statistics defend Fed hawks ahead of the key inflation clues and FOMC.
• Fresh tensions surrounding China, First Republican Bank prod USD/INR sellers above 200-DMA.

USD/INR picks up bids to defend the previous day’s rebound from a fortnight low with mild gains around 81.90 during early Friday.

That said, the US Dollar rebound seems to have triggered the USD/INR pair buyer’s optimism. However, the cautious mood ahead of India’s Federal Fiscal Deficit for March and the US Core Personal Consumption Expenditure (PCE) Price Index for the said month restrict the pair’s immediate moves.

The USD/INR pair bounced off the lowest levels in two weeks the previous day after the US Dollar managed to cheer mostly upbeat inflation signals in the headline growth numbers. On Thursday, the first readings of the US Gross Domestic Product (GDP) for the first quarter (Q1) of 2023, also known as Advance readings, marked mixed outcomes. That said, the headline US GDP Annualized eased to 1.1% from 2.0% expected and 2.6% prior but the GDP Price Index inched higher to 4.0% on an annualized basis from 3.9% prior and 3.8% market consensus.

Further, the Personal Consumption Expenditure (PCE) Prices for Q1 rallied to 4.2% from 3.7% in previous readouts whereas the Core PCE figures also crossed 4.8% market forecasts and 4.4% prior with 4.9% mark for the said period. It should be noted that a slump in the weekly Initial Jobless Claims also allowed the US Dollar to remain firmer.

It’s worth mentioning that the upbeat earnings from Meta Platforms jostle with Amazon’s recession warning and welcome results to entertain equity bulls on Wall Street the previous day. The same seemed to have joined downbeat US GDP figures to prod the USD/INR pair buyers.

Alternatively, US banking fallout fears weighed on the sentiment amid reports that the First Republic Bank (FRB) plans to sell half its loan book to fill a $100B deposit flight gap.

On the same line is the likely deadlock over the US debt ceiling talks, as most policymakers have contrasting views, also prods the optimists during the pre-data anxiety. Recently, House Speak Kevin McCarthy said, “I won't pass a clean debt-limit increase.”

Furthermore, the recent escalation in the geopolitical fears surrounding China also weighs on the sentiment and the Indian Rupee. Earlier in the day, China’s Envoy to Japan said, “The issue surrounding Taiwan is a red line that should not be crossed.”

It should be observed that the mildly bid prices of WTI crude oil, around $74.85 by the press time, allow USD/INR to remain firmer due to New Delhi’s reliance on energy imports and record deficit.

Against this backdrop, the S&P500 Futures remain directionless around mid-4,100s after rising the most in 1.5 months the previous day whereas the US Treasury bond yields remain lackluster following a notable recovery in the 10-year and two-year bond coupons in the last two days.

Moving on, India’s Federal Fiscal Deficit for March, prior 14,538.62B, will precede the US Core PCE Price Index for March, expected to ease to 4.5% YoY versus 4.6% prior, to entertain USD/INR pair traders. However, major attention will be given to the risk catalysts as the recent worsening of the sentiment in India prods the INR bulls.

Technical analysis

Although a two-week-old descending resistance line challenges USD/INR bulls around the 82.00 round figure, the pair’s downside remains limited unless the quote provides a daily closing beneath the 200-DMA support of 81.65.