CAD/INR Outlook:
Slightly positive, but likely to move sideways due to the rate being above its recent average and facing mixed signals from key factors.
Key drivers:
• Rate gap: The Bank of Canada maintains a cautious monetary policy stance, contrasting with India's ongoing challenges from a current account deficit.
• Risk/commodities: Oil prices are at recent highs, supporting the Canadian dollar since Canada is a major oil exporter; higher prices generally boost the CAD.
• One macro factor: India's widening trade deficit continues to exert pressure on the Indian Rupee as it heavily relies on crude oil imports.
Range:
Expect movement within a volatile 8.2% range, likely staying close to current levels but not testing the extremes.
What could change it:
• Upside risk: A significant rise in oil prices could further boost the CAD.
• Downside risk: Continued FPI outflows regarding the INR could deepen its depreciation against the CAD.