EUR/INR Outlook:
The outlook for EUR/INR is slightly positive, but likely to move sideways as the rate is above its 90-day average and trading within a moderate range.
Key drivers:
- Rate gap: The European Central Bank's decision to maintain interest rates reflects a more stable monetary policy compared to India's ongoing challenges, creating pressure on the INR.
- Risk/commodities: Oil prices are significantly higher, which impacts the INR negatively due to India's heavy reliance on crude imports, while supporting the Euro due to the macroeconomic implications of energy costs.
- Macro factor: The persistent current account deficit in India, driven by a widening trade gap, continues to weaken the rupee against the euro.
Range:
EUR/INR is likely to drift within its recent range as the combination of factors provides mixed signals.
What could change it:
- Upside risk: A stronger-than-expected recovery in Eurozone economic indicators could boost the euro significantly.
- Downside risk: Continued foreign portfolio investment outflows from India could exert additional downward pressure on the INR.