Lloyds Banking Group are dovishly preparing for lower UK interest rates, causing the Pound Indian Rupee (GBP INR) exchange rate to weaken.
Lloyds Announces Additional 3,000 Job Losses in Brexit Cost-Cutting Operation
Since the 2008 financial crisis, Lloyds Banking Group has been on a serious cost-cutting exercise, having already shed around 54,000 jobs. In October 2014 Lloyds Banking Group announced a further 9,000 roles would go as part of a cost-cutting programme which would last three years. Now, on top of those job losses, another 3,000 roles are set to be axed and an additional 200 branches closed as the bank prepares for lower interest rates and Brexit uncertainty. The decision will apparently save the company £400 million per year.
According to Chief Executive António Horta-Osório, the Bank of England (BoE) will cut interest rates at its upcoming policy meeting, reducing Lloyd’s ability to capitalise. He claimed;
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Given the uncertainty, it is too early to determine the impact on our formal longer term guidance at this stage. However, while the business will remain highly capital generative, it is possible that this capital generation may be somewhat lower in future years than previously guided. We will formally update guidance when we have a clearer view of likely outcomes.
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In other worrying news, the latest consumer confidence poll conducted jointly by YouGov and the Centre for Economics and Business Research (CEBR) has fallen at the fastest pace in six years, with the tumble from 111.3 to 106.6 taking the index to its lowest in three years. Meanwhile, French advertising group JCDecaux has claimed it will scale back its plans to install huge 84” digital advertising screens in Transport for London (TfL) hubs following the ‘Brexit’ vote.
The Pound registered -0.5% losses against the Indian Rupee in response to the day’s dire news, taking in down to 88.3080.
Indian Rupee Mixed on Lack of Domestic Data; New Transhipment Ports Boost Investor Hopes
The Indian Rupee is mixed overall, with a lack of domestic data leaving little support for an INR advance. However, investor sentiment is on the rise as the Indian government takes steps to improve the nation’s transhipment prowess. India’s coast stays into one of the world’s major shipping routes, but a lack of transhipment ports in the country means imports and exports have to detour through hubs in Dubai, Singapore or Sri Lanka. The country’s first transhipment port is currently being built by a domestic conglomerate owned by billionaire Gautam Adani in Vizhinjam, on the southern tip of India. It is hoped that this entrepot will claim a share of business currently held by well-establish hubs in other parts of Asia.
An Adani Group executive commented that;
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The port can attract a large share of the container transshipment traffic destined for, or originating from, India which is now being diverted primarily through Colombo, Singapore and Dubai.
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After this port has been established, the government will finance a second port in Tamil Nadu, which alone is expected to result in Indian companies saving in excess of INR 13.4 billion (£152 million) per year thanks to the access to a direct shipping route. The government expects that combined the two ports – the first of which was initially postulated 25 years ago – will cost an estimated INR335.4 billion (£3.79 billion), to improve the traffic of export cargo by 66% percent by 2021. The entrepots will help India as it looks to increase exports of goods such as machinery and cars.
Pound Indian Rupee (GBP INR) Exchange Rate Forecast; UK Consumer Confidence to Dominate Pairing Movement
India’s economic data released tomorrow consists of the low-impact Government Budget Value and Foreign Reserves figures.
The UK, however, is set to release the latest GfK Consumer Confidence survey results. Forecasts are for a weakening from -1 to -8. However, there are two main reasons why the actual score could be much lower.
Firstly, these forecasts are based upon the pre-voting June GfK survey results, in which confidence clocked in at -1. But a special post-referendum poll showed confidence had weakened to -9, so there is a chance that sentiment is already below the level it is forecast to ‘drop’ to.
Secondly is that recent post-Brexit data has revealed a significant drop in business confidence – one that went well below what analysts had forecast. It is therefore not unlikely that consumer confidence will also register a more severe decline than forecast.
Because of this, the GBP INR exchange rate faces downside risks tomorrow.