GBP/INR Outlook:
The GBP/INR rate is likely to increase as it is positioned 1.8% above its recent average and near the higher end of its 3-month trading range. This is supported by the Bank of England's signals to maintain a restrictive monetary policy.
Key drivers:
• Rate gap: The Bank of England's cautious stance on interest rate increases contrasts with the Reserve Bank of India's flexible exchange rate policy, which is allowing the INR to depreciate.
• Risk/commodities: Geopolitical tensions in the region are increasing market volatility, impacting the demand for safer currencies and supporting the GBP against the INR.
• One macro factor: Ongoing inflation in the UK is pressuring the Bank of England to act, enhancing the pound’s appeal.
Range:
Expect the GBP/INR to test its recent highs while remaining volatile within the established range.
What could change it:
• Upside risk: A surprising increase in UK interest rates could further bolster the pound.
• Downside risk: A deterioration in regional geopolitical conditions could heighten INR demand, adversely affecting the pound.