On Monday, the Indian Rupee (INR) staged a recovery from recent losses, propelled by positive US job data that bolstered Treasury yields and the US Dollar (USD). The upbeat employment figures are anticipated to diminish hopes for early rate cuts by the US Federal Reserve (Fed), resulting in a broader strength of the Greenback.
Market analysts predict the Reserve Bank of India (RBI) will maintain its interest rate unchanged during its upcoming policy review on Thursday, aligning with the consensus that the US Federal Reserve might cut its key interest rate in the next quarter.
The US ISM Services PMI, scheduled for release later on Monday, will be closely monitored, with attention turning to the RBI interest rate decision later in the week.
Key Market Movements:
India’s S&P Global Services PMI rose to 61.8 in January, surpassing the previous reading of 59.0 and exceeding the estimated 61.2, indicating robust services growth for the 30th consecutive month.
India’s 10-year benchmark bond yield saw a substantial weekly drop, closing at 7.0555% on Friday, marking the largest decline in 15 months.
The RBI is expected to maintain its benchmark interest rate at 6.50% during the upcoming policy review, according to economists surveyed by Reuters.
The Indian government plans to allocate a record 11.11 trillion Rupees (approximately $134 billion) for infrastructure development, with a projected budget deficit of 5.8% of GDP for fiscal year 2024.
The Indian S&P Global Manufacturing PMI increased to 56.5 in January, up from 54.9 in November, indicating strong manufacturing growth.
US Job Data and Rate Expectations:
The US Nonfarm Payrolls (NFP) report for January surpassed expectations, with 353,000 jobs added, up from 333,000 in December.
The Unemployment Rate remained steady at 3.7%, while Average Hourly Earnings grew 4.5% YoY in January.
The probability of a March rate cut by the Fed dropped to 19%, compared to 38% the day before, as per the CME FedWatch tool.
Federal Reserve Chair Jerome Powell expressed caution about a rate cut in March, emphasizing the need for confidence in sustainable inflation before making such a decision.
Technical Analysis:
The USD/INR pair trades weaker, consolidating within a descending trend channel of 82.78–83.45.
The bearish tone remains, supported by the pair being below the key 100-period Exponential Moving Average (EMA) on the daily chart.
The 14-day Relative Strength Index (RSI) indicates bearish momentum, standing below the 50.0 midline.
Potential resistance levels include 83.00, 83.18, and 83.35, while support levels are at 82.71, 82.45, and 82.25.
