The Indian Rupee (INR) opened flat against the US Dollar (USD) on Friday, with the USD/INR pair hovering near Thursday’s high of 95.27 as market participants awaited the release of the United States Nonfarm Payrolls (NFP) data for July at 06:00 PM IST or 12:30 GMT [1]. The cautious market tone was set by weaker-than-expected ADP Employment Change data for July, which came in at 44,000 compared to consensus estimates of 65,000 and TD Securities’ forecast of 50,000 [1]. TD Securities noted that while ADP data is not heavily weighted for month-to-month NFP moves, the moderation in both monthly and weekly ADP figures aligns with expectations for softer NFP job gains [1].
NFP estimates suggest the US economy added 80,000 jobs in July, up from 57,000 in June, with the unemployment rate expected to remain steady at 4.2% [1]. Average Hourly Earnings, a key indicator for wage growth and inflation outlook, are projected to rise by 0.3% month-on-month and 3.5% year-on-year [1]. Policymakers have signaled ongoing concerns about inflation remaining above the 2% target, with Chairman Kevin Warsh stating the central bank “won’t hesitate to act” if necessary to address elevated price pressures [1]. The CME FedWatch tool currently indicates a 54.5% probability of a rate hike at the Federal Reserve’s September meeting [1].
In commodities, oil prices have rebounded after a significant decline over the past two weeks, driven by escalating tensions between Iran-aligned Houthis and Saudi Arabia, which have heightened fears of a prolonged energy supply disruption in the Middle East [1]. The MCX Crude Oil contract expiring on August 19 was trading 1.13% higher at approximately Rs. 7,460 at press time [1]. Currencies from oil-importing economies like India typically underperform when oil prices rise [1].
From a technical perspective, USD/INR is trading around 95.27 with a mildly bearish near-term bias, as the spot rate remains below the 20-day exponential moving average [1].
CONCLUSION
The Indian Rupee remained stable ahead of the US NFP release, with market sentiment cautious due to weaker US employment data and rising oil prices. The outlook for the INR may be influenced by upcoming US labor data and ongoing geopolitical tensions affecting energy markets. Policymakers’ focus on inflation and the potential for a Fed rate hike in September add further uncertainty to currency and commodity markets.