Commerzbank notes that USD/INR eased 0.2% on Friday to 95.20 but still gained 0.9% over the week, remaining within a 94–96 range. The bank links India’s macro backdrop to lower Oil prices, which should support demand and ease inflation, while weak monsoon conditions pose downside growth risks and may keep the RBI cautious.

Range trading with growth risks

"The final HSBC services PMI was little changed at 57.4 in June (preliminary: 57.3), down from 59.8 in May and the weakest reading in 17 months. The composite PMI also eased to 57.1 from 59.3, pointing to softer activity across both the manufacturing and services sectors."

"The loss of momentum appears to reflect the temporary impact of higher fuel prices following the Middle East conflict, weaker household purchasing power, and below-normal monsoon rainfall."

"Encouragingly, export demand remained resilient, reaching a three-month high, while input cost and output price inflation both eased as geopolitical disruptions subsided and oil prices retreated."

"Looking ahead, lower crude oil prices should help support domestic demand and ease inflationary pressures, although sustained monsoon weakness remains the key downside risk to growth and could keep the RBI on hold for longer."

"For USD/INR, it eased back 0.2% last Friday to 95.20 but it gained 0.9% for the week. It is still holding within the 94-96 range."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)