Bias: bullish-to-range-bound, as EUR/INR is above its 90-day average and in the upper half of the 3-month range.
Key drivers:
- Rate gap: ECB policy remains neutral with inflation easing, while the RBI keeps a tight watch on flows and continues FX interventions to defend the rupee.
- Oil trend: Crude holds near multi-week highs with volatility, lifting India’s import bill and nudging INR weaker, which tends to lift EUR/INR.
- Macro: India’s widening trade deficit and substantial capital outflows keep INR under pressure, creating a bias for a firmer euro against the rupee.
Range: EUR/INR is likely to drift within the 3-month range, with a tendency to test the upper end if risk appetite improves and oil remains firm, while dips stay shallow.
What could change it:
- Upside risk: unexpected Eurozone data stronger than expected or an ECB hawkish tilt could push the euro higher and lift EUR/INR.
- Downside risk: stronger INR from additional RBI support or a softer dollar reducing demand for euros could push EUR/INR toward the middle or lower end of the range.
