Narrowed Budget Deficit Shores up Pound Sterling (GBP) despite Brexit Unease
Pound Sterling (GBP) exchange rates edged higher against a number of peers this morning after the latest UK public sector net borrowing figures bettered forecast.
While the budget deficit narrowed from -4.7 billion to -3.2 billion in September, beating market expectations, the mood towards the Pound remained slightly muted.
Confidence in the outlook of the UK economy is still limited at this stage, in no small part thanks to the lingering uncertainty over Brexit.
After the UK and EU failed to agree a deal at this week’s crunch meeting the odds of a no-deal Brexit have increased, keeping GBP exchange rates under pressure.
Although some officials continue to sound positive notes on the prospect of an agreement investors still see little incentive to back a weakened Pound.
US-China Trade Tensions Put Pressure on Indian Rupee (INR) Exchange Rates
Mounting market jitters over US-China trade tensions have weighed on demand for the Indian Rupee (INR), meanwhile.
As the spat between the world’s two largest economies continues to escalate the Indian economy looks increasingly vulnerable to worsening global trade conditions.
The weaker-than-expected third quarter Chinese gross domestic product data failed to offer any encouragement to the Rupee this morning.
With signs pointing towards the global economy losing momentum the potential for further Indian growth looks limited.
As the Federal Reserve is also on track to raise interest rates once more before the end of the year the appeal of the Indian Rupee seems unlikely to improve in the near term.
GBP/INR Exchange Rate Vulnerable to Weakening UK Business Optimism
Looking ahead to next week, the Pound Sterling to Indian Rupee (GBP/INR) exchange rate may come under further pressure on the back of the latest CBI business optimism index.
Sentiment is likely to show a fresh deterioration thanks to increasing business unease over the prospect of a no-deal Brexit.
As the March 2019 deadline fast approaches businesses are expected to take an increasingly cautious view, especially if there are no signs of an imminent agreement.
However, if negotiators can demonstrate some form of solid progress towards a deal over the coming days this could encourage the Pound to recover some of its lost ground.
As long as Brexit-base jitters persist, though, the GBP/INR exchange rate remains vulnerable to further softening.
Lack of Domestic Data Limits Potential for Indian Rupee (INR) Strength
With Indian economic data thin on the ground in the days ahead INR exchange rates are likely to remain under pressure from wider market developments.
Unless the US and China show a willingness to reengage in trade discussions the general mood of markets is unlikely to see any particular improvement.
Domestic political tensions may also limit demand for the Indian Rupee ahead of state assembly elections, even though no radical change is anticipated at this stage.
Continued weakness in the oil market could help to shore up INR exchange rates, on the other hand, with lower prices offering Indian savings on its high level of oil imports.