Pound Indian Rupee (GBP/INR) Exchange Rate Climbs as Indian Consumer Prices Fall

Pound (GBP) Exchange Rates Recover After Wednesday’s Disappointing Round of Production Data

Sterling experienced some bumps and dips this morning but ultimately came out on top against the Indian Rupee, unperturbed by yesterday’s disappointing UK production figures and the sub-par NIESR GDP estimate for Q1 2018.

Today’s data calendar is rather sparse, however, and the recent speeches from Bank of England (BoE) Policymaker Ben Broadbent, and Governor Mark Carney revealed little-to-nothing in regards to forward guidance on monetary policy.

This has left the market focus somewhat lost, with the Pound largely benefitting from rate hike hopes in May (supported by recent hawkish comments from Bank of England Policymaker Ian McCafferty) and general caution with regards to riskier commodity currencies due to escalating tensions in Syria.

Indian Inflation Eases Further in March – Pound Indian Rupee (GBP/INR) Exchange Rate Retains Lead

Indian consumer prices increased by 4.28% year-on-year in March, down from the previous period’s 4.44% increase and marking a five-month low.

This was largely due to yet another slowdown in food price inflation.

This result, whilst positive, is still above the central bank’s medium-term target for inflation levels and had little immediate effect on the GBP/INR exchange rate.

One could attribute this lack of interest to the Reserve Bank of India’s (RBI) decision to hold the baseline interest rate on hold last week, but also on the back of expectations that consumer prices will actually climb higher from April onwards.

Teresa John, Economist at Nirmal Bang shared this outlook:

‘The consumer price index is likely to turn up from April 2018 onwards. An increase in MSP of agricultural produce, hikes in allowances to employees of state governments, high government spending ahead of elections and pass-through of the past increase in commodity prices are all likely to add to the inflationary pressure.’

This sentiment helped maintain Sterling’s lead.

In other news, India’s industrial and manufacturing production readings were slightly mixed today, with manufacturing rising year-on-year in February from 8.6% to 8.7%, but industrial production easing from 7.4% to 7.1%.

These readings, are still largely positive, however.

UK Unemployment and Wage Growth in the Week Ahead – What can Markets Expect for the GBP/INR Exchange Rate?

The Pound to Indian Rupee exchange rate could see greater movement next week when markets respond to the UK’s unemployment and wage growth readings.

If average weekly earnings have increased over the select period and unemployment remains at record-lows then it could push the Bank of England (BoE) even closer to a rate hike in May – a prospect that has only seemed to increase in likelihood in recent weeks.

In the meantime, however, this Friday will feature India’s balance of trade reading, with a substantial widening in the deficit from $-12B to $-14.5B expected.

If this occurs then GBP/INR could trade higher as the week draws to a close.

John Cameron

John studied economics at Cambridge University and later became an MSTA qualified Technical Analyst. He began working for TorFX almost a decade ago and now holds a Senior Account Manager position. As well as lending his clients support and guidance, John has produced market commentary and detailed exchange rate analysis for a number of online publications.

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