- Indian Rupee (INR) pares losses from previous day
- Service sector PMI records 52.3
- US Dollar (USD) falls as investors brace for Democratic wave
- US ADP payroll data & Fed minutes up next
The US Dollar Indian Rupee (USD/INR) exchange rate is edging lower on Wednesday paring gains from the previous session. The pair settled on Tuesday +0.07% at 73.12. At 11:15 UTC, USD/INR trades flat at 73.07.
Data revealed that growth in the dominant service sector in Indian continued to lose momentum in December as covid cases started to rise again. According to the Nikkei/IHS Markit Services PMI slipped to 52.3 in December down from November’s 53.7, although remained in expansion for a third straight month. The level 50 separates expansion from contraction.
A spike in the number of covid cases in India is curbing output in India’s dominant sector threatening to derail the fragile economic recovery from the covid recession. The first few months on 2021 are still expected to be challenging amid a resurgence of covid cases and before the vaccine rollout programme picks up.
Gains in the Rupee are being capped by surging oil prices. West Texas Intermediate rallied 5% on Tuesday and is extending those gains today, trading over $50 per barrel at a fresh 9 month high. Oil has jumped after OPEC+ group agreed to output production cuts through February and March.
The US Dollar is declining versus the Rupee and against its major peers as expectations are building of the Democrats winning both seats in the Georgia senate runoff. A blue wave would mean that Joe Biden would have a majority in the upper house of just 1 (Vice President Kamala Harris’ tie breaker vote). As a result, the path would be easier towards achieving his policy goals such as larger fiscal stimulus.
Investors will also turn their attention towards ADP payroll data ahead of Friday’s non farm payroll and the minutes from the latest Fed meeting for further clues as to the next steps for policy.