The Indian rupee has moved sideways this year as investors focused on the recent Indian election and the actions by the Reserve Bank of India (RBI). The GBP/INR pair was trading at 106.51 on Wednesday, a few points below the year-to-date high.
The USD/INR, on the other hand, was trading at 83.50, a few points below its all-time high of 83.71.
Reserve Bank of India actions
The Indian rupee has remained in a tight range this year as traders watched the actions of the Federal Reserve, Reserve Bank of India (RBI), and the Bank of England (RBI).
In India, the RBI has maintained interest rates unchanged as the bank continued watching trends in inflation. It has done that for seven straight meetings.
There are signs that the country’s inflation is falling, which can force the bank to start cutting rates later this year. The recent data showed that the headline Consumer Price Index (CPI) dropped to 4.75% in June from 4.83% in May. This decline was steeper than the median estimate of 4.90%.
The headline CPI has been in a downward trend after peaking at over 7.4% last year and 7.80% in 2022. In a statement, the bank estimated that inflation will remain between 4% and 4.5% this year. It also expects that the economy will expand by 7.2% this year.
The main concern that the RBI has is that the cost of food has remained stronger than expected in the past few months.
With emerging market countries like in Brazil and Mexico starting to cut interest rates, there are signs that the RBI will be under pressure this year. Economists expect it to slash rates in the third or fourth quarter of this year.
Besides, other slower-growing countries like in Sweden, Switzerland, and the European Union have already started slashing rates.
USD/INR forecast
The USD to INR exchange rate has remained steady because of the Federal Reserve, which has maintained interest rates steady in the past few months. These rates have remained between 5.25% and 5.50% because of the strong inflation numbers.
Economic numbers released in June showed that the headline CPI slowed to 3.3% in May while the core Personal Consumption Expenditure (PCE) figure dropped for the first time in six months.
Economists expect the Fed will start cutting interest rates in December if inflation continues falling. On the daily chart, the pair has formed an scending triangle pattern, which is one of the most popular bullish signs in the market/
The USD/INR pair has also remained above the 25-day and 50-day Exponential Moving Averages. Therefore, there is a likelihood that the pair will have a bullish breakout as buyers target the next point at 85.0.
GBP/INR technical analysis
The GBP to INR pair has also held steady in the past few days as traders estimate that the Bank of England will start cutting interest rates soon. Also, the pair is reacting to Thursday’s UK election that will lead to Labour Party winning.
On the daily chart, the pair has moved slightly above the 50-day and 25-day moving averages. It has also formed an inverse head and shoulders pattern, a popular bullish sign. Also, the Relative Strength Index (RSI) and the MACD have continued rising.
Therefore, the GBP/INR pair will likely continue rising in the coming days as buyers target the key resistance point at 108. This view will be confirmed if the pair rises above the key resistance point at 107.25, its highest level this year.
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