USD/INR clings to mild losses ahead of the Indian GDP, US PCE data

Indian Rupee edges higher on the softer US Dollar.
India’s GDP number is expected to expand to 6.8% in the July–September quarter compared with the previous year.
India’s GDP Quarterly for Q2 and US Core Personal Consumption Expenditure Price Index (PCE) will be in the spotlight on Thursday.

Indian Rupee (INR) drifts higher on Thursday as dovish comments from Federal Reserve (Fed) officials undermine the US Dollar demand. Asia's third-largest economy grew at 7.8% in the first quarter of the current fiscal year. India’s GDP number for the second quarter are scheduled to be released later in the day and is expected to grow at 6.8% in the July–September quarter compared with a year earlier.

Furthermore, Economic Affairs Secretary Ajay Seth expressed an optimistic view on the Indian economy on Wednesday, stating that the country is showing momentum and the growth rate in the second quarter is likely to be good. The Budget 2023-24 proposes to bring down the fiscal deficit to 5.9% of the GDP from 6.4% in the previous financial year. The government intends to decrease the budget deficit to less than 4.5% of GDP by 2025-26.

Investors will closely monitor India’s Gross Domestic Product (GDP) quarterly for the second quarter (Q2), which is scheduled for release on Thursday. Additionally, the development surrounding the last phase of state elections in India remains in focus, as a change in government might lead to policy modifications that could impact investors. On the US front, the Core Personal Consumption Expenditure Price Index (PCE) for October will be released, and this report could impact the expectations of the coming Fed decisions.

Daily Digest Market Movers: Indian Rupee strengthens amid the challenges

Indian economy is projected to expand by 6.8% in the July-September quarter compared to the same period last year, according to a Reuters poll.
Analysts anticipate that India's Gross Domestic Product will expand by more than 6.0% next year, making it the fastest-growing major economy.
Reserve Bank of India (RBI) projected growth of 6.5% for the period of July to September.
Domestic demand in India continues to be the primary driver of economic activity, as external demand remains fragile.
US Gross Domestic Product Annualized for the third quarter (Q3) grew 5.2% in the third quarter (Q3) from the previous reading of 4.9%, above the market consensus of 5.0%.
The US Core Personal Consumption Expenditure Price Index (PCE) for October is expected to ease to 0.2% MoM and 3.5% YoY.
Federal Reserve (Fed) Governor Michelle Bowman said she sought to keep alive the possibility of more rate hikes, raising concerns about the longevity of inflationary pressure.
Fed Governor Christopher Waller stated that the Fed won’t need to raise rates further and may begin cutting rates if inflation continues to ease over the next three to five months.

Technical Analysis: Indian Rupee keeps the positive outlook intact

The Indian Rupee trades strongly on the day. The USD/INR pair has traded in a familiar range of 82.80–83.40 since September. According to the daily chart, the continuation of the upward bias remains valid as the pair holds above the key 100-day Exponential Moving Average (EMA) with an upward slope. Further upside looks favorable, backed by the 14-day Relative Strength Index (RSI) that holds above the 50.0 midline.

The immediate target for bulls to beat will emerge at the upper boundary of the trading range at 83.40. The additional upside filter to watch is the year-to-date (YTD) high of 83.47, and finally a psychological round figure of 84.00. On the flip side, the 83.00 psychological mark offered support to USD/INR. A decisive break below 83.00 will see a drop to the confluence of the lower limit of the trading range and a low of September 12 at 82.80, followed by a low of August 11 at 82.60.

US Dollar price in the last 7 days

The table below shows the percentage change of US Dollar (USD) against listed major currencies in the last 7 days. US Dollar was the weakest against the New Zealand Dollar.

	USD	EUR	GBP	CAD	AUD	JPY	NZD	CHF
USD		-0.83%	-1.74%	-0.86%	-1.61%	-1.71%	-2.57%	-1.35%
EUR	0.82%		-0.90%	-0.03%	-0.78%	-0.87%	-1.72%	-0.51%
GBP	1.68%	0.87%		0.85%	0.11%	0.02%	-0.83%	0.37%
CAD	0.85%	0.04%	-0.87%		-0.74%	-0.83%	-1.69%	-0.48%
AUD	1.58%	0.76%	-0.12%	0.74%		-0.09%	-0.94%	0.26%
JPY	1.68%	0.86%	-0.03%	0.84%	0.08%		-0.85%	0.36%
NZD	2.50%	1.69%	0.81%	1.64%	0.93%	0.84%		1.19%
CHF	1.33%	0.51%	-0.39%	0.49%	-0.26%	-0.35%	-1.20%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

GDP FAQs

What is GDP and how is it recorded?

A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022.
Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.

How does GDP influence currencies?

A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency.
When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.

How does higher GDP impact the price of Gold?

When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.

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