USD/INR loses ground on stronger Indian GDP, focus on US PMI, Fed’s Powell speech

• Indian Rupee gains momentum on the upbeat Indian growth number.
• India’s GDP expanded by 7.6% for the Q2 of this fiscal year, making it the fastest-growing major economy.
• Investors will closely watch the US ISM Manufacturing PMI and Fed Chair Jerome Powell’s speech later on Friday.

Indian Rupee (INR) gathers strength on Friday, bolstered by the stronger-than-expected India’s growth number. The country’s GDP expanded 7.6% in the September quarter of this fiscal year and remained the fastest-growing major economy, according to the statistics ministry on Thursday. The expansion in the Indian economy was boosted by government spending and robust performance in the manufacturing, mining, and construction sectors. This reading came in better than the projections of 6.5% by the Reserve Bank of India (RBI).

Despite inflation falling to a four-month low of 4.87% in October, it is expected to remain above the RBI's 4% target for the next two years. The markets anticipate the RBI to remain hawkish in its upcoming policy and will keep its key interest rate unchanged at 6.50% for a fifth consecutive meeting.

Market players will focus on the US ISM Manufacturing PMI for November, due on Friday. The figure is expected to grow to 47.6 from 46.7. Furthermore, Fed Chair Jerome Powell is set to speak. Market anticipation has become more aggressive regarding Fed policy easing, with Fed funds futures now pricing five quarter-percentage-point rate cuts next year, according to the CME Group.

Daily Digest Market Movers: Indian Rupee trades on the front foot despite multiple global headwinds

• The Indian economy grew 7.6% in the July–September quarter of the current fiscal year 2023-24, remaining the world’s fastest-growing major economy.
• India's fiscal deficit from April to October was 8.04 trillion Indian Rupees or 45% of the estimate for the whole year.
• Indian Prime Minister Narendra Modi said on Thursday that the GDP growth data for the second quarter of the current fiscal year demonstrated the Indian economy's resilience and strength in the face of global challenges.
• Domestic demand in India continues to be the primary driver of economic activity, as external demand remains fragile.
• The Reserve Bank of India (RBI) is likely to maintain its key interest rate unchanged at 6.50% for a fifth consecutive meeting on December 8, according to a Reuters poll.
• US Core Personal Consumption Expenditures Price Index (Core PCE), the Federal Reserve’s preferred inflation gauge rose 0.2% MoM and 3.5% YoY in October.
• US Initial weekly Jobless Claims rose to 218K from the previous period week of 211K, below the 220K expected while the Continuing Claims surged to 1.930 million versus the 1.841 decline prior.
• US Gross Domestic Product Annualized for the third quarter (Q3) expanded 5.2% in the third quarter (Q3) from 4.9% in the previous reading, better than 5.0% estimated.

Technical Analysis: The Indian Rupee maintains its positive view

Indian Rupee edges higher on the day. The USD/INR pair has traded within a familiar range of 82.80–83.40 since September. Technically, USD/INR maintains the bullish vibe as the pair holds above the key 100-day Exponential Moving Average (EMA) on the daily chart. Additionally, the upward momentum is reinforced by the 14-day Relative Strength Index (RSI) that holds above the 50.0 midline.

The upper boundary of the trading range at 83.40 acts as an immediate target for USD/INR bulls. Any follow-through buying will see the next hurdle at the year-to-date (YTD) high of 83.47, en route to a psychological round mark of 84.00. On the downside, the critical contention level will emerge at the 83.00 psychological mark. A breach of this level will pave the way 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.