• Indian Rupee (INR) is rising after a flat finish yesterday
  • Inflation is expected to rise to 4.8%YoY
  • US Dollar (USD) is falling against its major peers
  • Fed Powell welcomes cooling inflation

The US Dollar Indian Rupee (USD/INR) exchange rate is edging lower after finishing flat in the previous session. The pair ended 0% in the previous session, settling on Tuesday at 83.50. At 18:00 UTC, USD/INR trades -0.02% at 83.48 and is in a range of 83.45 to 83.51.

The rupee was edging higher amid expectations that price inflation edged up in June after five months of declines.

Economists expect consumer price inflation to rise 4.8% year over year in June, up from 4.75% in May. This is due to a sharp increase in vegetable prices due to damage to crops caused by extreme weather conditions.

Tomatoes, onions, and potatoes which are considered staples in India, saw prices surge by double digits last month as extreme heat and strong, heavy floods disrupted agricultural production.

Meanwhile, core inflation, which excludes more volatile items such as food and fuel, most likely stayed flat at an all-time low of 3.1% in June.

The data comes as the economy is expected to grow by more than 8% in the last fiscal year. The RBI is expected to leave interest rates on hold, with just one rate cut expected later this year.

The US Dollar is falling against the Rupee but is rising versus its major peers. The US Dollar Index, which measures the greenback versus a basket of major currencies, trades  +0.13% at the time of writing at 105.14, after losses last week.

The US dollar is inching higher as investors digest the first appearance by Federal Reserve chair Powell this week.

Powell said more good data would strengthen policy makers confidence that inflation is moving towards the central bank’s 2% target.

Powell said in a prepared statement for the Senate hearing that cutting interest rates by too little or too late could put the economy and the labor market under pressure at risk. He also said that cutting rates too soon or by too much could reverse the progress that had been made with inflation.

Core PCE, the Fed’s preferred gauge of inflation, has cooled by 2.6%. CPI inflation is due to be released on Thursday and is expected to show that consumer prices eased to 3.1%.

Powell also noted that recent data showed a cooling in the labour market. His comments come after unemployment rose to its highest level since 2021, and a number of economists have warned that a slowdown in the jobs market could worsen. Following his appearance, the USD traded modestly higher.

Attention will now turn to his second appearance before the house tomorrow and ahead of inflation data on Thursday.