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  • India’s GDP could contract -14.8% according to Goldman Sachs
  • Failure to contain coronavirus is hampering India’s chances of an economic recovery
  • US Dollar trades lower on concerns over its economic recovery
  • US consumer confidence in focus

The US Dollar Indian Rupee (USD/INR) exchange rate is moving southwards on Friday, paring gains from the previous session. The pair settled +0.07% higher on Thursday at 73.60. At 11:15 UTC, USD/INR is trading -0.24% at 73.42. The pair set to end the week at approximately the same level that it started the week.

As coronavirus cases spike through 5 million, the prospects for a solid economic recovery in India are fading rapidly. Global institutions, such as the Asian Development Bank have cut the economic outlook for India. Investment Bank Goldman Sachs is the latest to do so. The bank now forecasts a -14.8% contraction in GDP for the year ending March 2021. The ADB is expecting a -9% contraction, whilst the OECD expects to see the Indian economy contract by 10%.

Failure to contain the spread of the virus means that business activity and consumption, the backbone of the Indian economy will remain severely depressed.

India Rating and Research Ltd, which is part of Fitch International rating agency predicts that the Indian economy will contract -11.8% this year, significantly worse than the -5.8% previously expected as Indian still struggles to deal with its first wave of covid.

The US Dollar is out of favour across the board. Investors are selling out of the greenback amid growing fears over the health of the economic recovery in the world’s largest economy.

A slew of economic data yesterday from the US missed expectations. 860,00 Americans signed up for unemployment benefits, above the 850,000 forecast and only slightly down from the 893,000 recorded the week before. The data shows that the recovery in the labour market is slowing considerably.

US consumer confidence data is due next. Analyst are expecting morale to tick slightly higher. Should the data disappoint, the US Dollar could fall lower.