The Indian Rupee is drifting marginally lower versus the US Dollar on Tuesday, paring gains from the previous session.
At 11:30 UTC, USD/INR was trading 0.05% higher at 73.39. This is mid-way through its daily trading range of 75.28 – 75.63.
Normura Predicts GDP -0.5% In Worse Case Scenario
The Indian Rupee continues to trade around its all time low as concerns grow over the impact of the coronavirus pandemic on the Indian economy. Prime Minister Narendra Modi announced a three-week nationwide lock down from Tuesday last week which will have a huge detrimental impact on businesses. India’s informal sector, the backbone of the economy, will be hardest hit
With almost 75% of the Indian economy in lock down the hit to economic growth in the region will be enormous. Normura has lowered its 2020 GDP forecast to -0.5% year on year, down from 4.5% amid a weakening of both domestic and external demand. The financial institution also believes that the recovery will be weak in its worst-case scenario projection, amid lasting damage to some areas of the economy.
The forecasts for Indian growth line up with expectations elsewhere across the globe, where economists have been slashing their economic outlook repeatedly.
The Reserve Bank of India is considering a 100 basis point rate cut to help support the economy.
US Consumer Confidence Up Next
With over 160,000 coronavirus cases confirmed in the US, investors are turning their attention to the impact that the pandemic is having on consumer attitudes and their spending. Whilst the coronavirus lock down is causing a demand for gods and services to evaporate, companies are laying off staff to control costs. A record 3.3 million US citizens signed up for unemployment insurance in just one week ending 21st March. With so much uncertainty over job security, consumer confidence will be low.
Last week, University of Michigan sentiment data showed that morale declined to the lowest level since October 2016. In today’s US Conference Board consumer confidence figures analyst are expecting to see a plunge in morale.
When confidence is low, consumption declines, this is bad news for the US economy, which is so dependent on consumers.
