GBP/INR Exchange Rate: Rupee Rises vs Pound Sterling on Irish Border Issues

Pound to Indian Rupee (GBP/INR) Exchange Rate Slides

The GBP/INR exchange rate has fallen for a second day today, with the pairing struggling as Irish border concerns prevent Brexit negotiations from progressing.

This follows Monday’s high-profile collapse of talks, when an apparent agreement on the Irish border was shot down by Democratic Unionist Party (DUP) leader Arlene Foster.

The DUP has remained a thorn in the side of negotiations today, with party members opposed to the idea of Northern Ireland keeping EU laws after Brexit.

Although a ‘soft’ border and free trade conditions with Ireland might seem desirable, DUP officials were firmly opposed, demanding that Northern Ireland leaves the EU with the UK.

This leaves future Brexit talks in question, as stubborn DUP officials could theoretically continue to obstruct Brexit negotiations.

Pound to Rupee (GBP/INR) Trading Worsened by Services Sector Disappointment

In addition to the Brexit problems, the Pound has also been damaged by UK services sector stats recently.

The services PMI for November showed a slowdown from 55.6 points to 53.8, indicating reduced activity in the sector.

Given that this included the spending sprees of ‘Black Friday’ and ‘Cyber Monday’ deals, the slowdown is an especially concerning result.

Indian Rupee Rises against the Pound despite Gloomy GDP Forecasts

Pound weakness has left GBP/INR higher despite recent Indian data not being especially supportive.

One of the main issues for traders has been that GDP growth is not expected to impress in the coming year.

Although Q3 GDP growth was recently reported at 6.3%, Amit Kapoor, Chair of the Institute for Competitiveness, pointed out that the worst post-financial crisis GDP growth was 6.9%.

Warning about future economic issues, Kapoor said;

‘The [GDP] data released last week does not paint a promising picture; the growth rebound was brought about largely on account of the manufacturing sector.

[This, along with the deficit and poor exports] points to bleak prospects for the Indian economy.

This will remain true for the next few quarters. [At present], the only ray of hope resides with the favourable external sector as a lucrative source of demand’.

Successful Resolution to Brexit Talks could Trigger Pound to Indian Rupee Rally

If the current issue with the Irish border is resolved, allowing Brexit negotiations to progress to trade talks, we can expect significant Pound Sterling to Indian Rupee exchange rate gains.

The Reserve Bank of India (RBI) interest rate decision will be announced on December 6th, but is not expected to result in any rate change.

Commenting on the RBA’s likely decision, Union Bank MD and CEO Rajkiran Rai said;

‘It’s going to be a status quo [decision]. The liquidity in the system is very low, deposit rates are firming up and there are concerns about inflation’.

Any RBI remarks about Indian inflation could have an impact on the Rupee, given that RBI officials are believed to be watching inflation to see if it breaches the bank’s 4% target.

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Adam Solomon

Adam joined the team at TorFX soon after graduating from University in 2005 with a degree in Journalism. Since then Adam has advanced to become both Head of Trading and Head of Treasury. His keen interest in the currency market and knowledge of what drives exchange rates makes him perfectly positioned to produce regular market updates focused on the movements of the major currencies.

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