The current market bias for the INR to GBP exchange rate is bearish.
Key drivers include:
- Interest rate differentials: The Bank of England is expected to lower rates, while the Reserve Bank of India might maintain its stance, which could widen the gap.
- Economic growth: India's robust growth contrasts with the UK's anticipated slowdown, influencing currency strength.
- Trade relations: Ongoing trade concerns and tariff impacts between the UK and U.S. may also create pressures on the GBP.
In the near term, the exchange rate is expected to trade within a stable but limited range, influenced by recent movements. The INR to GBP rate is currently about 1.9% below its three-month average, indicating some downward pressure.
An upside risk could arise from improved trade relations between India and the U.S., potentially strengthening the INR. Conversely, a downside risk includes any significant cuts in UK interest rates that may weaken the GBP further.