NDFs Little Changed After Soft Local CPI Data

Softer than expected industrial production and local CPI data applied some light pressure to the INR in NDF trading, although the move failed to test intraday highs in both the 1- and 3-month contracts (both of which were registered around the time of late intraday highs during onshore USD/INR trade) and has since moderated. The lack of a test of highs comes despite the broader USD pushing to fresh multi-session highs since the local close and with benchmark U.S. crude oil futures more than paring modest losses.

• In lieu of the CPI data, Pantheon Macroeconomics note that “the sharp slowdown in headline inflation last month was led in large part by a continued softening in food and beverage inflation. Base effects were favourable, but it’s also worth noting that trends at the margin reassuringly are cooling once again, after having firmed up noticeably earlier this year.”
• They went on to flag their estimates that “core inflation slowed to 5.2% from 5.8%, falling more comfortably below the 6% upper bound of the RBI’s target range for headline inflation. Overall, while the April CPI print was firmer than we expected, it bolsters our conviction on our below-consensus average forecast of 5.4% for 2023, as well as on our view that the RBI will stand pat for the foreseeable future.”