The EUR/INR cross rate fell below 89 for the first time since 2023 as the European Central Bank signalled readiness for further interest rate cuts amid weak Eurozone economic growth and easing inflation. The euro weakened to $1.065 against the US dollar and fell correspondingly against the Indian rupee, which also benefited from strong domestic macro data and FII inflows.
ECB President Christine Lagarde, speaking at the ECB's Frankfurt headquarters, acknowledged that the Eurozone economy had underperformed expectations in Q1 2026 and that monetary policy needed to remain supportive. Markets have priced in two additional 25 basis point rate cuts from the ECB by December 2026, which would take the deposit facility rate to 2.25% from its current level of 2.75%.
For Indian exporters to Europe, the weakening euro creates a competitive challenge as their goods become more expensive in euro terms. IT companies with significant European revenues are also impacted, as euro-denominated contracts translate to fewer rupees when the currency weakens. However, Indian companies with Euro-area import costs or European debt obligations may benefit. The cross rate is expected to remain under pressure as long as the US-Europe growth and interest rate differential persists.
