INR/GBP Outlook:
Bearish, as the rate is below its recent average and near recent lows, pressured by several ongoing factors.
Key drivers:
- Rate gap: The Reserve Bank of India has maintained a more flexible policy compared to the Bank of England’s recent dove-driven stance, creating a rate differential that favors the GBP.
- Risk/commodities: Current oil prices remain high, increasing India's import costs and further straining the rupee.
- Weak manufacturing exports: A slowdown in manufacturing exports due to global demand challenges continues to weaken the INR.
Range:
The INR/GBP is expected to drift sideways within its recent 3-month range, reflecting accumulated pressures rather than sharp fluctuations.
What could change it:
- Upside risk: A surprising improvement in UK economic data could strengthen the GBP further against the INR.
- Downside risk: A worsening of India's current account deficit might lead to further depreciation of the INR.