Pound to Rupee News: Reserve Bank of India in Surprise Rate Cut Move as GBP/INR Continues to Fall against Indian Rupee

Pound Sterling Continues to Slide against Indian Rupee (GBP/INR) as Bank of England cuts UK Growth Forecast and Trump Postpones China Talks

UPDATE: The Pound (GBP) is down against the Indian Rupee (INR) this morning and is trading at a rate of around ₹92.222 on the inter-bank market.

This morning’s slip comes after US President Donald Trump suggested it was ‘unlikely’ he will meet with his Chinese counterpart Xi Jinping before 2 March, sparking a rise in global risk sentiment.

As the US Dollar (USD) fell against the Rupee, so too did the Pound.

This comes after yesterday’s Bank of England interest rate decision, in which UK interest rates were left on hold at 0.75%, with BoE Governor Mark Carney saying that the ‘fog of Brexit’ had begun to descend on the British economy.

Pound Indian Rupee (GBP/INR) Exchange Rate Falls despite RBI’s Surprise Interest Rate Cut

This was despite the Reserve Bank of India (RBI) making a surprise cut to interest rates, with the bank changing its stance from ‘calibrated tightening’ to ‘neutral’.

Interest rates were reduced from 6.5% to 6.25%, with the bank taking a dovish approach, although this did little to weaken the Rupee against the Pound.

Meanwhile, the Bank of England (BoE) released its latest interest rate decision today, keeping rates steady at 0.75% as expected.

Following this, the GBP/INR exchange rate continued to slide, with the BoE’s Quarterly Inflation Report stating:

‘Growth appears to have slowed at the end of 2018 and is expected to remain subdued in the near term.’

Earlier: Pound (GBP) Sentiment Dampened by Falling House Prices

This morning, UK Prime Minister, Theresa May headed to Brussels for further negotiations on the Brexit withdrawal agreement, although any changes to it have previously been ruled out by the EU.

Likely weighing down Sterling was the rumour that the Prime Minister does not have a firm proposal, and that even if she did it would be rejected by the EU.

Also likely to have contributed to the dip in the Pound was the release of the latest Halifax House Price Index which showed a sharp monthly decline in house prices, with Managing Director at Halifax, Russell Galley, stating:

‘Attention will no doubt be drawn towards the monthly fall of -2.9% from December to January, the second time in three years that we have seen a drop as the new year starts. However, the bigger picture is actually that house prices have seen next to no movement over the last year, with annual growth of just 0.8%.

‘This could either be viewed as a story of resilience, as prices have held up well in the face of significant economic uncertainty, or as a continuation of the slow growth we’ve witnessed over recent years.’

Indian Rupee (INR) Rises against Sterling despite Service Sector Growth Cooling

Tuesday saw the release of the Nikkei India Services PMI, which found that business activity growth cooled further, as the figure fell for the second straight month from 53.2 to 52.2.

Despite this, the data showed that companies continued to hire, with job creation hitting a three-month high, and optimism in terms of outlook was sustained, which likely hindered the Pound Indian Rupee (GBP/INR) exchange from rate rising over the session.

Pollyanna De Lima, Principle Economist at IHS Markit stated:

‘Expansion rates in the Indian service sector have been at similarly modest levels for the past four months, with January data extending the recent trend. There is some sign that growth may run out of steam, in the short-term at least, as seen by the weakest improvement in demand for four months and relatively subdued optimism.

[…] The good news came from the Indian labour market. Job creation at service providers was among the strongest seen for the past seven-and-a-half years at the start of 2019. The increasing willingness of companies to hire workers should help reduce still high levels of unemployment in the country.’

GBP/INR Outlook: Will Sterling Slide Further on Brexit Pessimism?

The Pound Indian Rupee (GBP/INR) exchange rate will likely see movement as a result of continued Brexit tensions.

Today saw the European Commission President, Jean-Claude Juncker stress to the Prime Minister that the withdrawal agreement could not be changed.

With further talks agreed upon between the two, it is likely that the Pound will see upward support if the PM is able to negotiate so that the UK will not be ‘trapped’ in the backstop. If not, then Sterling could slide significantly against the Indian Rupee.

Millie Empson

Contact Millie Empson


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