INR/EUR Outlook:
The INR/EUR pair is slightly positive and likely to move sideways, trading just below the recent 3-month average. Current developments have bolstered the INR, but potential economic challenges in the Eurozone may limit significant gains for the euro.
Key drivers:
- Rate gap: The Reserve Bank of India's flexible exchange rate policy stands in contrast to the European Central Bank's ongoing accommodative stance.
- Risk/commodities: Oil prices are at recent highs, potentially increasing inflationary pressures in the Eurozone, which could weaken the euro further.
- One macro factor: Weak consumer confidence in the Eurozone is dampening the euro's outlook, despite a slight improvement in sentiments.
Range:
The INR/EUR exchange rate is likely to hold within its current range, oscillating between recent highs and lows as both currencies react to their respective economic signals.
What could change it:
- Upside risk: An acceleration in economic growth in the Eurozone could boost the euro's value.
- Downside risk: Further geopolitical tensions in the region could adversely affect the INR's performance.
