The Pound to Indian Rupee exchange rate edged lower on Wednesday despite the limp performance of the Indian Rupee, as investors sold off the Pound amid bearish expectations for Autumn budget statement. While GBP/INR does remain well above the week’s opening levels of 84.16 however.
Pound (GBP) Weak as Traders Expect Years of Challenge for UK Economy
The Pound surged on Monday due to a small burst of optimism towards the UK’s Brexit process. UK Prime Minister Theresa May hinted that the government would aim to negotiate a Brexit transition process, giving traders hope that businesses would be eased out of the European Union’s trade benefits rather than suddenly walking off a ‘cliff-edge’ in 2019.
However, this strength didn’t last and the Pound quickly dipped.
Sterling was sold on Tuesday despite a better-than-expected public sector net borrowing result for October, as analysts perceived that not only would the UK government miss its deficit targets considerably but that borrowing would only worsen in the coming years.
As UK Chancellor Philip Hammond made his first Autumn Statement during Wednesday’s session, investors reacted throughout the day amid dovish expectations for the UK’s short to long-term economic future.
Indian Rupee (INR) Remains Limp on Fed Rate Hike Bets
Demand for emerging-market currencies like the Indian Rupee has been poor in recent weeks as bets that the Federal Reserve will hike US interest rates in December soar.
US President-elect Donald Trump’s proposals to give a short-term boost to inflation has also left emerging-market currencies weaker, with analysts now expecting even more rate hikes from the Fed over the next year or so.
Prices of oil have surged and could increase further if OPEC lays out a convincing oil output cap plan, making it more difficult for emerging markets like India to buy.
Domestically, ongoing difficulties for Indian consumers after 500 and 1000 Rupee notes were suddenly made invalid by the government have also made traders wary of the Indian currency.
GBP/INR Forecast: Rupee Could Rebound from Lows in Coming Days
The Pound has little in the way of strong underlying factors on Wednesday and its outlook is unlikely to improve significantly in the coming days unless analysts become largely optimistic on any particular points from the UK’s Autumn Statement.
Concerns about the UK’s extraordinary (and deepening) deficit are likely to continue weighing on the British currency, as will anxiety about the coming years as the UK shifts into the Brexit process proper.
Meanwhile, the Indian Rupee is also likely to continue to trend poorly due to the increasing imminence of the Federal Reserve’s December policy meeting.
However, other INR factors may improve. Oil prices began to slip on Tuesday afternoon on OPEC doubts and could continue falling, giving the Rupee a bit more breathing room.
As the Rupee continues to slip against its major rivals, traders may see an appropriate point to buy the currency up from its cheapest levels, which could see GBP/INR trade closer to the week’s opening levels in the coming days.