The Pound to Indian Rupee (GBP INR) exchange rate tumbled Thursday afternoon after the Bank of England voted to leave monetary policy unchanged at its latest meeting.
GBP INR is currently trading around 84.49 following the BoE policy meeting down from around 85.58 earlier this morning.
Pound (GBP) Weakened by BoE Decision
The Pound (GBP) plummeted this afternoon as its members unanimously voted to keep interest rates at a record low of 0.25%.
In its statement the Bank made a drastic revision to its growth expectations for 2017, forecasting that the UK economy will now grow at 2% rather than at 1.4% as it predicted in November as the economy continued to perform better than expected after Brexit
However the BoE partly attributed the upward revision to growth to its decision to slash interest rates to 0.25% immediately after the referendum, with it still expecting the economy to feel the impact of Brexit over the next couple of years. In a statement following the rate decision BoE Governor Mark Carney told the press;
‘The Brexit journey is really just beginning. While the direction of travel is clear, there will be twists and turns along the way. Whatever happens, monetary policy will be set to return inflation sustainably to target while supporting the necessary adjustments in the economy.’
The BoE was largely unfazed about the rise in inflation however, with the Bank seeing little reason to change its outlook from November, hinting to investors that it was unlikely to raise interest rates in the near future in order to manage price rises.
Indian Rupee (INR) Gains as US Dollar (USD) Continues to Weaken
The Indian Rupee appreciated on Thursday as the continued downtrend in the US Dollar improves demand for emerging currencies like INR.
The ‘Greenback’ has come under growing pressure since Donald Trump’s inauguration following the signing of a number of controversial executive orders concerning trade deals and immigration.
Markets fear that Trump’s protectionist policies will leave the US economy increasingly isolated from the global market as the new administration pushes the country to ‘buy American’.
This has made currencies such as the Rupee more attractive to investors as they seek to take advantage of the weakness of USD.
GBP/INR Exchange Rate Forecast: UK Service PMI Ahead
The GBP INR exchange rate may retreat further on Friday following the release of the UK’s latest Services PMI, with economists expecting that activity will fall from 56.2 to 55.8 in January.
Meanwhile India will also release its latest services stats tomorrow with the Indian Rupee likely to rise if the services sector returns to growth to January.
Looking ahead to next week the UK government’s Brexit bill will pass through parliament allowing the House of Commons to make possible amendments to the bill, with opposition MPs likely to focus on ensuring that parliament is given a final vote on the terms of the Brexit deal.