The week has seen the Pound Sterling to Indian Rupee (GBP/INR) exchange rate climb from a low of 101.7439 to a high of 102.5137 today. This upsurge was primarily triggered by an ultimately positive set of UK Earnings and Employment figures boosting optimism in the Pound no end.
The Pound had an uncertain start to the week, with fluctuations occurring on Tuesday in response to the UK annual and monthly inflation rates for August. The yearly and Core annual figures both fell below estimates, with the former dropping from 0.1% to 0% and the latter hitting 1% instead of continuing at 1.2%, although both of these declines had been forecast. While the Pound initially declined against peers like the Euro and the US Dollar, the currency’s declines were limited due to the recently released Bank of England (BoE) minutes containing predictions by BoE Monetary Policy Committee (MPC) members that UK inflation would remain on or close to 0% until the end of the year, at which point they expect the rate will rise once again.
The Rupee was conversely damaged by inflation data on Monday; against many forecasts, all of India’s various Wholesale Price Indices (WPIs) declined, sending the Rupee down to 0.0097 after the results were announced (by contrast, the Pound rose to its weekly high of 102.6949). While WPIs have given little cause for optimism among the Indian Ministry of Finance, it is worth mentioning that Indian Consumer Price Indices (CPIs) remain trending at more positive numbers. Arvind Subramanian, Chief Economic Advisor for the Indian government, referred to the inflation gap by saying: ‘This diverging wedge is not completely understood’. Subramanian added that ‘In a situation like this, to exclusively focus on the CPI makes no sense…you have to look at the totality of price development’.
A far more definite victory for the Pound has been witnessed today, following the release of the UK Average Weekly Earnings for the three months to the end of July and the Unemployment Rate and Change for the same period. A substantial rise from 2.6% to 2.9% was seen in the first of the three results and a -0.1% drop from 5.6% to 5.5% was seen in the second. Although fractional, this drop in the number of unemployed persons was complimented by a 42k increase in the number of persons employed. Sterling went on a major rally following the news, and the rise from $44.00 per barrel of crude oil to over $45.00 today has only pushed the Pound higher up in the pairing.
For the remainder of the week, Pound Sterling/Indian Rupee exchange rate movement may occur as a result of the UK Retail Sales figures for August, the US Philadelphia Fed Survey for September, the US Federal Open Market Committee (FOMC) Interest Rate Decision and Indian Foreign Reserves data.
Unfortunately for the currently bullish Pound, tomorrow’s retail figures are all expected to decrease with the exception of the monthly sales figure including auto fuel, which is expected to rise marginally from 0.1% to 0.2%. The influential ‘Philly Fed’ survey later on in the day is expected to show a decline from 8.3 points to 6, and as one of the last major US publications before the FOMC decision, it may just have the potential to swing voters one way or another. The biggest news, of course, is the decision itself, which has been predicted this week to see the interest rate rise from 0.25% to between 0.38% and 0.44%. The FOMC’s vote will come in tomorrow evening. After the tumult has passed on Friday, India’s current foreign reserves are expected to increase slightly.