The GBP/INR exchange rate has softened during the last seven days, dropping from a high of 98.4485 at the beginning of the week to a six-and-a-half month low of 96.9933.
GBP/INR spiked on Monday the 4
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after the Nikkei PMI showed that Manufacturing sector index had dropped below the key 50 mark. Falling from 50.3 to 49.1 showed that activity within the sector had marginally contracted during December, rather than increasingly slightly as predicted. Pound Sterling wasn’t able to hold on to its gains for long, as its own manufacturing sector also performed poorly during December. Despite a predicted rise to 52.8, the Markit PMI dropped from 52.5 to 51.9, raising concerns over the contribution from the manufacturing sector to UK GDP. A rise in consumer credit and mortgage approvals further fuelled concerns that Britain is entering another housing bubble and building up unsustainable levels of debt.
Despite a forecast -0.1 point drop in the India Nikkei Services PMI, the index rose from 50.1 to 53.6 on Wednesday. The Indian Rupee was able to advance on Pound Sterling after news that George Osborne would give a speech in Cardiff in which he would warn of a ‘cocktail of threats’ to the UK economy. The text of the speech was made available several hours before but the GBP/INR exchange rate remained within a narrow region until the speech commenced, at which point it dropped from around 97.9907 to 97.4554. GBP was also harmed by a slightly larger-than-expected drop in the UK services PMI, which fell from 55.9 to 55.5.
Pound Sterling is trading marginally up against the Indian Rupee today, despite news from survey company Moody’s which predicts India’s economy will remain one of the fastest growing in the world, although that prediction does depend upon the Reserve Bank of India (RBI) being able to control inflation. Pay revisions for government employees, as well as for pensioners, are anticipated to boost consumption, while a normal monsoon in 2016, after 2015’s unusually weak, continuous ones, will improve agricultural production.
The INR/GBP exchange rate could take a large hit tomorrow, with production figures expected to register a huge drop in activity for November. Industrial Production is anticipated to have dropped from 9.8% to 2.8% year-on-year (YoY), while Manufacturing Production will fall YoY from 10.6% to 2.2%. December’s Inflation Rate is expected to creep up from 5.41% to 5.5%.
Thursday 14
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sees the Bank of England make their decision regarding interest rates and asset purchasing. While the likelihood is that there will be no change in either policy, investors will pay close attention to the split of policymakers when the vote on interest rates is taken. If the number of policymakers voting for an increase has risen from one (Ian McCafferty) then this could boost Pound Sterling as investors hope that a rate hike is closer than they currently expect.
The GBP/INR exchange rate is currently trading between 96.9640 and 97.5810.