Indian Rupee: Range-bound trade risks around CPI – Societe Generale

Societe Generale strategists note that India’s June Consumer Price Index (CPI) release will be important for bond markets, with the 10-year IGB yield holding near its 200-day moving average around 6.71%. They highlight that inflation is expected to rise modestly, while robust FPI inflows and a narrower trade deficit support the Indian Rupee (INR), but do not ensure a sustained move away from the 95.23 level on the 50-day moving average.

INR supported but still constrained

"In EMs, June CPI data for India due later today will be closely watched by bond markets with the 10y IGB yield anchored at the 200dma (6.71%). Yields have retraced almost 43bp from the May peak."

"Inflation is forecast to have edged up to 4.2% in June from 3.93% in May, although robust FPI inflows have continued following the investment incentives announced by the RBI and MinFin in early June."

"Middle East conflict and oil prices should exert a greater influence in the near term."

"The narrowing of India’s trade deficit in June should provide support to the INR but does not guarantee a move away from 95.23 (50dma)."