Rupee’s rocky recovery, UK-India FTA, inflation rising

Though we expect the Indian rupee to strengthen against the US dollar over the next 18 months, the weakening over recent days amid renewed US-Iran hostilities demonstrates that it is unlikely to be smooth going. Next week, the long-awaited UK-India free-trade agreement will take effect. And the CPI data for June due on Monday should show that the headline inflation rate rose above the RBI's 4% target for the first time in 16 months, setting the stage for the central bank to start a tightening cycle before long.