The Indian rupee (INR) opened weaker against major currencies on Thursday, as markets await India’s May Consumer Price Index (CPI) data scheduled for release at 10:30 GMT. This retail inflation report is crucial, as it will influence whether the Reserve Bank of India (RBI) decides to cut interest rates again during its August policy meeting.
Inflation Expected to Ease Slightly
Economists forecast that headline retail inflation will ease modestly to 3% in May, down from 3.16% in April. If confirmed, this would be the lowest inflation reading since April 2019. Signs of easing inflation have encouraged RBI officials to consider further monetary policy easing.
RBI’s Recent Policy Adjustments
At its recent policy meeting, the RBI shifted its stance from “accommodative” to “neutral,” signaling limited room for additional easing after earlier rate cuts. The central bank had cut the repo rate by 50 basis points to 5.5% and reduced the cash reserve requirement ratio by 100 basis points to 3%.
Market Caution Ahead of Data
Foreign institutional investors (FIIs) showed caution ahead of the inflation report, resulting in a modest sell-off of Indian stocks worth Rs 446.31 crore on Wednesday.
World Bank Lowers India Growth Forecast
Meanwhile, the World Bank lowered its economic growth forecast for India in fiscal year 2026 by 40 basis points to 6.3%. Despite this revision, India is still expected to be the fastest-growing among the world’s major economies. The downgrade is mainly due to weak export activity caused by global trade barriers.
USD/INR Technical Outlook: Sideways Movement Likely
The USD/INR currency pair attracted buying interest near its weekly low of 85.47 on Thursday. However, the short-term outlook remains uncertain, as the pair struggles to stay above its 20-day exponential moving average (EMA), currently near 85.48.
The 14-day Relative Strength Index (RSI) hovers between 40 and 60, indicating a sideways trend.
Support is found at the June 3 low of 85.30. If the pair breaks below this level, it may test the May 26 low of 84.78. On the upside, surpassing the May 22 high of 86.10 could push USD/INR toward the 11-week high near 86.70.
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