- Indian Rupee (INR) under pressure as economists downgrade GDP
- Expected growth -9.8% vs -9.5% just two months earlier
- US Dollar (USD) rises on safe haven flows on stimulus stalemate
- US jobless claims to show labour market recovery has stalled
The US Dollar Indian Rupee (USD/INR) exchange rate is extending gains for a third straight session on Thursday. The pair settled +0.2% higher on Wednesday at 73.59. At 10:15 UCT, USD/INR trades +0.1% higher at 73.65.
According to economists polled by Reuters, the Indian economy is expected to experience its deepest contraction on record this fiscal year. The poll also showed that the economists were even more pessimistic over the outlook for the Indian economy than they were just two months ago. Furthermore, 90% of economists polled do not believe that the government stimulus goes far enough to cushion the economy from the pandemic hit.
India has recorded 7.7 million covid cases. The strict lockdown has been eased and most restrictions on businesses to stem the spread of coronavirus have now been removed. Still the Reserve Bank of India sees a very gloomy outlook, but has kept interest rates unchanged, putting the stimulus ball in the government’s court. So far, measures by the government aren’t considered to go far enough.
This fiscal year India’s GDP is expected to contract by -9.8% according to the mean from the analysts polled. This is down from the previously forecast -9.5% contraction.
The US Dollar is advancing across the board in risk off trading. Scepticism over whether US Congress will be able to agree additional stimulus is once again weighing on the mood in the market boosting demand for safe havens such as the US Dollar, whilst riskier assets and currencies are firmly out of favour.
Looking ahead, attention is turning to US jobless claims data and the live US Presidential debate between President Trump and Joe Biden. US jobless claims are expected to show the recovery in the labour market has stalled. Meanwhile the debate could offer both candidates a platform on which to improve their position in the polls.
