- Indian Rupee (INR) is flat after a flat week last week
- Indian government considering a tax cut
- US Dollar (USD) falls versus its major peers
- US NY Empire Manufacturing eases.
The US Dollar Indian Rupee (USD/INR) exchange rate is unchanged after a flat week last week. The pair rose +0.03% in the previous week, settling on Friday at 83.54. At 17:00 UTC, USD/INR trades -0.01% at 83.53 and is in a range of 83.63 to 82.51.
The newly elected Indian government is considering reducing personal tax rates in specific categories for some individuals to boost consumption and, therefore, the economy.
A plan may not be announced until July when Prime Minister Narendra Modi’s government presents the first federal budget after his party failed to win a majority in the recent elections.
However, a recent survey showed that Indians are still worried about inflation, unemployment, and falling incomes.
The Indian economy grew 8.2% from 2023 to 2024, but consumption has been just half that. The government hopes that a reduction in personal tax could lift consumption in the economy and increase savings for the middle class. However, this could also be inflationary.
The US Dollar is unchanged against the Rupee but falling versus its major peers. The US Dollar Index, which measures the greenback versus a basket of major currencies, trades -0.5% at the time of writing at 105.03, after gains last week.
With last week’s inflation data and the Federal Reserve interest rate decision in the rearview mirror, the US dollar is heading lower.
While the Federal Reserve warned of just one interest rate cut this year, the market is less convinced and continues to price in two cuts after quarter-than-expected inflation data.
Today, there is no high-impacting US data; instead, the market is focusing on the New York Fed’s manufacturing index, which came in at -6 in June, up significantly from May’s -15.6. It is not quite as bad as the -9 print that economists were forecasting. Still, an Empire State reading for day zero points to a monthly contraction in activity.
Delving into the data, new orders improved, and the outlook for future business conditions also improved. Optimistic at 30.1. However, the employment component deteriorated.
Looking ahead across the week, the market will look to retail sales data tomorrow and several Fed speakers who might provide further clues on when the central bank could start cutting rates.