Rising risk appetite knocked the Pound to Indian Rupee (GBP/INR) exchange rate off its recent uptrend, helping the Indian currency to capitalise on a softening Pound.
Growing doubts over the prospect of the Trump administration pushing through its much-mooted tax reforms in the near future helped to boost the Rupee.
As Democrats made significant gains in state elections earlier in the week confidence in the administration’s ability to deliver on its policy promises has faltered once again.
With the upside potential of the US Dollar looking distinctly limited at this juncture, given that a December Federal Reserve interest rate hike is already effectively priced in, the higher-yielding Rupee has found support.
This helped to offset the negative impact of the recent bullish run in oil prices, which have climbed to a two-year high on the back of hopes that the OPEC-led production limiting agreement will see an extension.
May’s Cabinet Worries Weigh Down GBP INR Exchange Rate
Fresh turmoil within Theresa May’s cabinet weighed heavily on the Pound, meanwhile, with market confidence in her leadership diminishing markedly.
Within a week of the departure of then-Defence Secretary Michael Fallon the resignation of International Business Secretary Priti Patel further disrupted the balance of the cabinet.
All in all this creates a rather chaotic impression, giving investors little hope that the government is moving any closer to a unified position on Brexit.
Unless May can regain some greater semblance of authority this looks set to keep the GBP INR exchange rate under pressure, especially as other members of the cabinet seem vulnerable in the wake of recent scandals.
Pound Sterling Exchange Rates Vulnerable to Weaker UK Growth Data
Further volatility is likely in store for Sterling on the back of the NIESR gross domestic product estimate for the three months to October.
Investors are hoping to see another demonstration of solid growth of 0.4%, if not better, as the economy continues to recover from a weaker first half of the year.
However, any disappointment could dent the GBP INR exchange rate, with softening growth only likely to exacerbate existing concerns over the negative impact of Brexit-based uncertainty.
As forecasts point towards a narrowing in September’s UK visible trade deficit, though, this may offer support to the Pound ahead of the weekend.
With considerable doubt still hanging over the UK’s future trade relationship with the EU any reduced vulnerability to a deterioration in trade conditions is likely to be received positively.
Rising Inflation Forecast to Boost Indian Rupee (INR) Exchange Rates
The Indian Rupee could see greater volatility next week, with October’s inflation rate set to prompt some market movement.
Inflationary pressure is expected to have strengthened somewhat on the year, rising from 3.38% to 3.48%, in part thanks to developments in the oil market.
However, if inflation fails to show signs of picking up this could encourage the Reserve Bank of India (RBI) to adopt a more dovish outlook on monetary policy in the coming months.
A widening trade deficit could also weigh heavily on demand for the Rupee, boosting the GBP INR exchange rate in turn.