GBP/INR Outlook: Slightly positive, but likely to move sideways, as the rate is above its recent average and lacks a clear driver.
Key drivers:
• Rate gap: The Bank of England is expected to hold rates steady, while the Reserve Bank of India faces pressure due to foreign investor outflows, creating divergence in monetary policy.
• Risk/commodities: The volatility in crude oil prices impacts economic stability, which could affect both currencies differently depending on global consumption trends.
• One macro factor: The UK’s manufacturing sector showed growth in January, which may provide some support to the GBP amidst uncertainty regarding future rate cuts.
Range: The GBP/INR is likely to trade within its recent range, without testing extremes unless new information emerges.
What could change it:
• Upside risk: A positive shift in UK economic data could spur a stronger GBP.
• Downside risk: Continued foreign portfolio outflows from India could exert further pressure on the INR, impacting the GBP/INR rate.