India Cuts GST to Two Slabs as Rupee Edges Up Against Dollar

The Indian Rupee climbed against the US Dollar on Thursday, hovering around 88.15 as Modi's government announced a dramatic overhaul of the country's tax structure. I've been watching this unfold, and frankly, it's about time they simplified that convoluted GST system.

Finance Minister Sitharaman finally pulled the trigger on slashing the four-tier tax framework to just two rates - 5% and 18% - while completely scrapping the 12% and 28% brackets. Of course, they couldn't resist slapping a 40% tax on luxury goods to make up for lost revenue. Typical government move - give with one hand, take with the other.

The new framework kicks in September 22nd, supposedly aimed at helping the average Indian and middle-class families. But let's be honest - this is likely a calculated political maneuver to boost consumption ahead of key state elections.

What's interesting is how this might backfire on the Reserve Bank of India. More money in consumers' pockets means increased spending, which could easily trigger inflation. Kiss those additional interest rate cuts goodbye for the remainder of the year!

Meanwhile, foreign investors continue dumping Indian stocks - they've been net sellers every single trading day in September so far. The selling pace has eased compared to the bloodbath we saw in July and August, but Wednesday still saw foreigners offload a hefty Rs. 1,666.46 crores worth of Indian equities.

The dollar's weakness is also helping the rupee after disappointing US job openings data. The JOLTS report showed only 7.18 million new postings versus the expected 7.4 million. Traders are now betting heavily on Fed rate cuts, with probability for September cuts jumping to 97.6%.

Looking ahead, Friday's US nonfarm payrolls report will be crucial. Thursday's ADP employment and ISM Services PMI will set the tone - with private sector hiring expected to plummet to just 65K from July's 104K.

Technically, USD/INR remains bullish despite today's dip, staying above its 20-day EMA around 87.73. The RSI sits comfortably above 60, suggesting this uptrend has legs. Support sits at the 20-day EMA, while 89.00 is the obvious resistance to watch.