USD/INR remains below 86.00 following WPI inflation data

• USD/INR remains under pressure following a slowdown in India's WPI inflation, which eased to 2.05% YoY in March.
• India's March CPI is expected to show a cooling inflation rate of 3.6%--its lowest in eight months.
• The US Dollar struggles to stabilize as fears of stagflation continue to weigh on sentiment.

The Indian Rupee strengthens against the US Dollar, with USD/INR declining over 0.30% to trade around 85.80 during early European hours on Tuesday. The pair remained under pressure following the release of India's Wholesale Price Index (WPI) inflation data, which eased to 2.05% year-on-year, a four-month low in March due to a slower rise in food prices, from 2.38% in February--below the 2.5% forecast in a Reuters poll.

Wholesale food prices rose at a slower pace of 4.66% in March compared to 5.94% the previous month. Markets are also bracing for India's March CPI release, with expectations pointing to a cooling inflation rate of 3.6%--the lowest in eight months. This has bolstered hopes that the Reserve Bank of India (RBI) could consider rate cuts, especially as GDP growth slows and global trade uncertainty persists.

On the Indian equities front, Indian share markets surged on Tuesday, tracking gains on Wall Street after the US announced tariff exemptions on select tech products. Sentiment was further supported by reports that US President Trump is considering similar exemptions for auto manufacturers.

Meanwhile, the US Dollar Index (DXY), which tracks the USD against a basket of six major currencies, edged higher after hitting its lowest level since 2022. It hovered near the 100.00 mark, attempting to stabilize amid rising concerns over stagflation risks.

In comments made earlier in the session, Atlanta Fed President Raphael Bostic stated that the US central bank still faces a long journey to bring inflation down to its 2% target--casting doubt on market expectations for further rate cuts.