Bias: Bearish-to-range-bound, as the current level is below the 90-day average and positioned in the lower half of the 3-month range.
Key drivers:
- Rate gap: The Reserve Bank of India is more accommodative compared to the Bank of England, which is expected to introduce further rate cuts in 2026.
- Risk/commodities: The recent decline in oil prices has put additional pressure on the Indian Rupee, as a weaker oil market typically affects India's import costs.
- One macro factor: India's trade deficit has widened significantly, largely due to tariffs impacting exports to the U.S., weighing negatively on the currency.
Range: The INR/GBP pair is likely to hold near its current levels, with potential drifting that may test lower extremes depending on ongoing economic developments.
What could change it:
- Upside risk: Progress in trade negotiations with the U.S. could boost investor confidence and strengthen the INR.
- Downside risk: Continued foreign capital outflows and weaker economic data could drive the INR lower against the GBP.