The Indian Rupee (INR) declined against the US Dollar (USD) on Tuesday, as softer-than-expected inflation data boosted expectations that the Reserve Bank of India (RBI) will continue its rate-cutting cycle. April’s consumer inflation figure fell to a near six-year low, reinforcing the view that monetary policy in India will remain accommodative in the near term.
The dovish turn from the RBI has weighed on the INR, particularly as broader concerns return about potential trade tariffs under a second Trump administration. The reintroduction of reciprocal tariffs could pressure emerging market currencies, including the INR, as global trade tensions resurface.
Oil Prices and Trade Talks Offer Limited Support to INR
However, the downside for the Rupee may be cushioned by a drop in global crude oil prices. As the world’s third-largest oil importer, India stands to benefit from lower energy costs, which improve its current account position and support the currency.
Further, India is in advanced discussions with the United States on a phased trade agreement. According to Bloomberg, both countries are working toward a deal in three tranches, with an interim agreement targeted before July—when new US tariffs are expected to take effect. The preliminary deal is expected to include market access for industrial goods and some agricultural products, as well as easing non-tariff barriers such as quality standards.
Growth Outlook Diverges from Official Estimates
On the economic front, ratings agency ICRA projected India’s GDP growth at 6.9% for the quarter ending March 31 and 6.3% for the 2024–25 fiscal year. These forecasts fall short of the National Statistics Office’s (NSO) more optimistic estimates published in February, suggesting growth momentum may moderate.
Meanwhile, Moody’s downgraded the US credit rating from ‘Aaa’ to ‘Aa1’, citing unsustainable debt growth and persistent fiscal deficits. The move aligns with previous downgrades from Fitch and S&P, further complicating the global macro backdrop.
Fed Speakers in Focus
Traders are now turning their attention to remarks from several Federal Reserve officials scheduled later on Tuesday, including Thomas Barkin, Alberto Musalem, Adriana Kugler, Raphael Bostic, Mary C. Daly, and Beth M. Hammack. Their comments will be scrutinized for clues on the future path of US interest rates, which could impact global currency markets and the USD/INR pair.
Technical Outlook: USD/INR Faces Resistance, Bearish Tone Persists
USD/INR remains under pressure, trading below the 100-day Exponential Moving Average (EMA), which currently stands at 85.60. This level serves as a key resistance barrier, and a sustained move above it could see the pair rise toward the 86.00–86.05 zone—marking both a psychological threshold and the upper boundary of a broader trend channel.
On the downside, initial support lies at 85.00. A break below this level could open the door for a test of 84.61, the May 12 low, with further losses exposing the lower trend channel support near 84.20.
The 14-day Relative Strength Index (RSI) is currently hovering around the 50 neutral level, indicating the potential for further consolidation or a minor rebound in the near term.
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