The Indian Rupee (INR) gained strength on Friday, supported by a combination of US President Donald Trump’s decision to temporarily lower tariffs on numerous countries and a decline in crude oil prices. As India is the world’s third-largest oil consumer, lower oil prices tend to have a positive impact on the INR, contributing to its rebound.
In addition to external factors, the INR’s appreciation was fueled by investor optimism following the Reserve Bank of India’s (RBI) decision to cut the policy repo rate by 25 basis points (bps) to 6.00% during its April meeting earlier this week.
However, the US Dollar (USD) remains under pressure from fluctuating expectations regarding US monetary policy. The Federal Reserve’s (Fed) rate cut outlook has shifted, with markets now anticipating a resumption of rate cuts by June, potentially reducing the policy rate by a full percentage point by the end of 2025. If rate cut expectations are dialed back further, the USD could see renewed strength.
US Economic Data and Fed Speeches in Focus
Traders are looking ahead to US economic data, with the March Producer Price Index (PPI) and advanced Michigan Consumer Sentiment reports scheduled for release later on Friday. Additionally, speeches from Fed officials Alberto Musalem and John Williams will be closely monitored for any insights into the central bank’s future policy direction.
Inflation Data and Fed Officials’ Stance
In the US, recent inflation data showed the Consumer Price Index (CPI) fell to 2.4% year-over-year in March, down from 2.8% in February and below market expectations of 2.6%. Core CPI, which excludes volatile food and energy prices, rose 2.8% year-over-year, also lower than the previous 3.1% and missing the forecast of 3.0%. On a monthly basis, the headline CPI dipped by 0.1%, while core CPI increased by 0.1%.
Fed officials, including Boston Fed President Susan Collins and Chicago Fed President Austan Goolsbee, expressed concerns about the impact of aggressive trade tariffs. Collins warned that tariffs would likely drive inflation higher and hinder growth in the near term, while Goolsbee emphasized the uncertainty surrounding the economy and the Fed’s cautious approach to monetary policy.
Technical Outlook for USD/INR
The USD/INR pair remains bullish, trading above the 100-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) hovers near the midline, suggesting the potential for further consolidation in the near term.
Immediate resistance is seen at 86.61, the high from April 10, with further upside potential targeting the psychological level of 87.00. A break above 87.00 could lead to a rally toward 87.53, the high from February 28. On the downside, key support is located in the 86.00-85.90 range, with additional support at 85.48 and 85.00.
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