Can the Pound Sterling to Indian Rupee (GBP/INR) Exchange Rate Recover from Six-Month Lows?

Pound to Indian Rupee Exchange Rate Slides on Persistent ‘No Deal’ Brexit Fear

A lack of notable data hasn’t prevented the Pound Sterling to Indian Rupee (GBP/INR) exchange rate from falling this week, as markets continue to focus on the latest Brexit developments and jitters.

Trade developments and weakness in the Pound (GBP) caused GBP/INR to tumble from the interbank rate of 90.02 to 89.12 last week, and GBP/INR has fallen further so far this week to it’s lowest level since January 2018.

Investors keep selling the Pound amid persistent concerns that the Brexit process may end without any kind of deal between the UK and EU – potentially leading to a cliff-edge scenario for UK businesses.

Brexit Jitters Continue to Undermine Pound (GBP) Exchange Rates

If the UK leaves the EU without any kind of post-Brexit trade deal, analysts and politicians fear it could have dire economic consequences for both Britain and the EU.

UK businesses and households would be hit hard by a ‘no deal’ Brexit, and uncertainty about what kind of Brexit is likely has already weighed on UK economic activity in recent months.

Over the past week, Bank of England (BoE) Governor Mark Carney has expressed concern about the rising likelihood of a ‘no deal’ Brexit, and UK officials have noted that negotiations may be headed in that direction too.

UK Prime Minister Theresa May and EU officials remain confident that a deal can be reached, but ‘no deal’ Brexit speculation continues to dominate headlines this week.

According to Christophe Barraud, economist from Market Securities in Paris:

‘A lot of companies can’t wait for the negotiations outcome in October so a lot of course are trying to hedge against a drop in the Pound.’

Indian Rupee (INR) Exchange Rates Climb as Trade Fears Take a Backseat

The Indian Rupee has seen something of a bullish recovery rally in recent weeks as investors have bought the currency back from its cheapest levels.

This has largely been due to market concerns about the possibility of a US-sparked trade war lightening somewhat, and US protectionist rhetoric with ally nations softening.

As trade tensions have subsided, risky emerging market currencies like the Indian Rupee (INR) became more appealing. The Rupee has also benefitted from slight weakness in the US Dollar (USD).

While the Indian Rupee’s strength has been limited by stronger oil prices, it has still been able to climb against a weak Pound.

Pound to Indian Rupee (GBP/INR) Forecast: Brexit Developments and UK Growth in Focus

Unless there are optimistic Brexit developments in the coming days, or investors opt to sell the Indian Rupee from its recent highs, the Pound to Indian Rupee (GBP/INR) exchange rate is unlikely to recover for some time.

While a slew of key UK ecostats will be published on Friday, concerns about the possibility of a ‘no deal’ Brexit are likely to overshadow even optimistic results.

Friday’s UK datasets include UK trade balance, Gross Domestic Product (GDP) growth, manufacturing and industrial production results from June. Q2 GDP growth projections and business investment projections will be published too.

Even if these UK ecostats from the end of Q2 beat forecasts, the Pound’s potential for recovery is limited as Brexit uncertainties weigh on the nation’s growth outlook.

This week’s only notable Indian data will come in on Friday too, in the form of the latest Indian foreign exchange reserves report.

Unless trade jitters worsen again though or there are optimistic Brexit developments, the Pound to Indian Rupee (GBP/INR) exchange rate is forecast to remain in a weakened state.

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Hannah Wilson

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