GBP/INR Outlook:
Slightly positive, but likely to move sideways as the rate is above its recent average, yet lacks a clear driver.
Key drivers:
• Rate gap: The Bank of England’s steady interest rate contrasts with the Reserve Bank of India’s more flexible approach, impacting relative currency strength.
• Risk/commodities: Fluctuating oil prices, which are above average, could weigh on the INR given India's dependence on crude oil imports.
• One macro factor: India's ongoing current account deficit, driven by a widening trade gap, continues to pressure the INR.
Range:
The GBP/INR is likely to hold within its recent 3-month range as factors influencing both currencies remain mixed.
What could change it:
• Upside risk: A stronger-than-expected UK economic indicator could boost the GBP further.
• Downside risk: Increasing foreign portfolio investment outflows could place additional downward pressure on the INR.