INR/GBP Outlook:
The INR/GBP exchange rate is slightly positive and likely to move sideways as it trades just below its recent average and remains within the mid-range of recent movements. Current factors are contributing to stable positioning.
Key drivers:
• Rate gap: The Reserve Bank of India's more flexible exchange rate policy contrasts with the Bank of England's cautious stance on interest rate adjustments, which could bolster the INR.
• Risk/commodities: Ongoing geopolitical tensions between India and Pakistan are increasing risk aversion, impacting currency stability and contributing to a stronger USD, indirectly affecting the INR.
• Macro factor: The recent US-India trade agreement has positively influenced exports, notably in pharmaceuticals and technology services, thereby strengthening the INR.
Range:
The INR/GBP pair is likely to hold within its recent average range, with potential for slight fluctuations but not extending to the extremes.
What could change it:
• Upside risk: A significant improvement in UK economic data could reduce BoE rate cut expectations, strengthening the GBP.
• Downside risk: Continued FPI outflows or escalating geopolitical tensions could pressure the INR.
