Higher UK Services PMI Boosts Pound Indian Rupee (GBP/INR) Exchange Rate
As the UK services PMI strengthened further than forecast in December the Pound to Indian Rupee (GBP/INR) exchange rate returned to a stronger footing.
The headline PMI measure rose from 53.8 to 54.2 on the month, indicating that the UK service sector had continued to expand ahead of the New Year.
However, the underlying details of the report were slightly less encouraging in nature, suggesting that the economy may struggle to maintain this momentum throughout 2018.
Chris Williamson, Chief Business Economist at IHS Markit, noted:
‘As has been increasingly the case in recent months, the good news comes with a health warning about the sustainability of the upturn. Digging into the details behind the resilient strength signalled by the headline numbers, the survey data reveal an economy that is beset with uncertainty about the outlook, which is in turn dampening business spending and investment.’
Even so, this was not enough to limit the appeal of the Pound (GBP) on Thursday as it trended higher against rivals including the Indian Rupee (INR) and US Dollar (USD).
Better-Than-Forecast Indian Data Fails to Dent GBP/INR Exchange Rate Uptrend
While the general sense of market risk appetite picked up in the wake of the Federal Reserve’s latest meeting minutes this was not enough to dent the bullishness of the GBP/INR exchange rate.
As the minutes failed to offer any fresh clues to markets regarding the likely timing of the next interest rate hike the mood towards the US Dollar diminished once again, to the benefit of the Indian Rupee.
Support for the Rupee was also encouraged as December’s Indian services PMI bettered forecast to deliver an unexpectedly strong improvement on the month, leaping from 48.5 to 50.9.
This puts the service sector back in expansion territory, suggesting that the domestic economy has started 2018 in a more robust state of health.
However, the relative bullishness of the Pound (GBP) prevented the GBP/INR exchange rate from coming under any particular pressure in spite of this solid data.
Cabinet Reshuffle Jitters Forecast to Weigh on Pound (GBP) Exchange Rates
Looking ahead, the GBP/INR exchange rate may struggle to hold onto its gains as political jitters over Brexit and the shape of the UK government start to pick back up.
Anticipation for Theresa May’s cabinet reshuffle is likely to set the Pound on a weaker footing next week, given existing concerns over the strength of the Prime Minister’s position.
Any significant changes to the cabinet could provoke fresh worries over the Conservative government’s approach to Brexit talks, especially if May’s powerbase is seen to weaken further.
Focus will also turn towards the NIESR gross domestic product estimate for December, which could boost GBP exchange rates further if growth is shown to have held up.
If the economy fails to show signs of growing as forecast in the fourth quarter, though, the mood towards the Pound could sour markedly.
Volatility Forecast for GBP/INR Exchange Rate on US Jobs Data
With fresh Indian data somewhat limited over the near term the downside pressure on the GBP/INR exchange rate should be a little more muted.
Even so, the Rupee could see some movement on the back of the latest US non-farm payrolls report, with a stronger US Dollar likely to weigh on INR exchange rates.
Any signs of accelerating wage growth within the world’s largest economy could spur the Fed into taking a more aggressive pace of monetary tightening, to the detriment of the Rupee.
On the other hand, any disappointment here could see the GBP/INR exchange rate extend its gains further, providing that market risk appetite remains solid.