Over the past seven days the Pound Sterling to Indian Rupee (GBP/INR) exchange rate was trending within the range of 97.7470 to 99.3389.
Since the Bank of England (BoE) reduced both its growth and inflation outlook following (not so) ‘Super Thursday’, the Pound Sterling has declined against any of its major peers, including the Indian Rupee. Additional GBP losses can be linked to concerns that the UK’s economy is significantly imbalanced. This was evidenced by weak industrial and manufacturing output but positive services growth. British growth is therefore being driven just by services output and domestic demand.
Meanwhile the Rupee has struggled in the face of damp demand for emerging market assets. This was primarily the result of China’s economic woes. However, as the week progressed the Rupee gained with China on a week-long break to celebrate the Lunar New Year. A rapid drop in oil prices also fuelled demand for the Indian asset given that Indian is one of the world’s foremost crude importers. Rupee appreciation was slow, however, as geopolitical tensions between India and Pakistan continue to weigh on investor confidence.
GBP and INR Exchange Rates Gain
On Wednesday the Pound Sterling advanced versus most of its major peers thanks to correctional trading. With recent Sterling depreciation seen as overdone, and with traders taking advantage of the Pound’s comparatively low trade weighting, demand for the Pound improved. Even a slew of disappointing domestic data results wasn’t enough to offset Sterling gains. However, the Pound’s appreciation is unlikely to be sustained with Bank of England (BoE) dovishness and ‘Brexit’ uncertainty continuing to hinder investor confidence.
Meanwhile, the Indian Rupee advanced versus most of its major peers despite rising crude prices. The fractional rise of oil came after a significant slump so prices remain comparatively low. The Rupee’s appreciation is mostly the result of US Dollar weakness amid predictions that the Federal Reserve will not look to hike the overnight cash rate anytime soon. Many analysts have been forced to reduce bets regarding the number of rate hikes likely to occur in 2016, with some going so far as to say the Fed will look to cut rates. This is supportive of demand for emerging-market assets and therefore the Indian Rupee.
GBP/INR Exchange Rate Forecast: UK Inflation Data to Provoke Volatility
There will be a number of ecostats over the coming week with the potential to provoke GBP/INR volatility. Of particular significance will be Tuesday’s British consumer prices data. Low inflation has been one of the main reasons the Bank of England (BoE) have held the overnight cash rate, so any improvement to British consumer prices will be met with a Sterling upsurge. Monday’s Indian inflation and manufacturing data should cause significant Rupee price swings, although crude oil prices and market sentiment will have a greater impact.