Possibility of BoE Rate Hike Drives Brief Rally in GBP/INR Exchange Rate
At the time of writing GBP/INR is down by around 0.5% after previously surging at the start of Friday’s session.
Pound Sterling Climbs v Rupee on Hawkish BoE Bets
The Pound was earlier trending higher against the Indian Rupee and many of its other peers this morning as BoE interest rate hike expectations offset some lacklustre UK economic data.
Speaking to Parliament earlier this week the BoE’s chief economist Andy Haldane suggested that soaring inflation means that the bank may need to raise interest rates at a faster pace than previously expectedly.
Some analysts suggest that this more hawkish outlook from the BoE could lead to the GBP exchange rate showing more resilience than in recent weeks.
City Index analyst Ken Odeluga said:
‘The key takeaway from the Bank of England … was that policymakers’ tolerance of inflation well above target has ended.’
‘Sterling uncertainty remains, but as UK monetary policy catches up with a stronger-than-forecast economy, probabilities for a sustained Sterling recovery are rising.’
Market bets of a May rate hike have now climbed to over 80%, up from around 50% at the start of February.
Indian Rupee Forecast Volatile as PNB Fraud Case Hangs over Currency
Meanwhile the volatility in Indian Rupee (INR) exchange rate continues this morning as the currency is rocked by the scandal surrounding India’s Punjab National Bank (PNB).
Confidence in the Rupee has been shaken during this week’s session as details emerged over a $1.8bn fraud case involving one of India’s largest banks.
It is alleged that employees at PNB helped obtain fraudulent advances for payments to overseas suppliers for a number of clients of the state run bank.
Bhaskar Panda of HDFC Bank said:
‘Worries of US rate hike, consequent rally in US yields, coupled with uncertainties due to the PNB episode has brought back pressure on the INR.’
GBP/INR Exchange Rate Forecast: Uptick in GDP to Bolster Rupee?
Looking ahead to next week’s session, the GBP/INR exchange rate may slide on Wednesday as India publishes its latest GDP figures.
The Indian Rupee is expected to rise on the back of the domestic GDP figures as economists forecast that annualised growth will have jumped from 6.3% to 6.9% in the fourth quarter.
Meanwhile the UK will release its latest PMI figures next week and investors will be watching closely for whether private sector activity slowed again in February.
Both the manufacturing and construction sectors were shown to have slowed sharply at the start of 2018 and a repeat performance is likely to drag on the Pound (GBP) exchange rate.