Pound Sterling to Indian Rupee (GBP/INR) Exchange Rate Gains Wiped Out by Cox’s Brexit Doubts

Pound to Indian Rupee (GBP/INR) Exchange Rate Can’t Hold Versus Broad Rupee Rally

A combination of Brexit panic attacks and a surging Indian Rupee (INR) have meant a bearish March for the Pound Sterling to Indian Rupee (GBP/INR) exchange rate so far. With Brexit uncertainties persisting, that may not change any time soon.

Last week saw the start of a strong recovery rally in the Indian Rupee, pushing GBP/INR down over two Rupees throughout the week overall to nearer the interbank level of 91.10.

A brief surge in demand for the Pound (GBP) yesterday took GBP/INR higher by around a Rupee, but continued Rupee strength and fresh Brexit uncertainty have since meant that yesterday’s gains have been erased.

At the time of writing ahead of today’s major Brexit vote, the Pound to Indian Rupee exchange rate was trending close to its worst levels in almost two months – since mid-January.

Pound (GBP) Exchange Rates Give Up Monday Gains as Brexit Deal Change Perceived as Minor

After a week of speculation that the UK and EU would not be able to reach a breakthrough that could bolster the domestic popularity of the government’s Brexit plan, the Pound (GBP) was offered some fresh support yesterday.

Investors piled into the British currency on Monday afternoon, as UK Prime Minister Theresa May agreed to a last-minute change in wording of the Brexit bill.

The wording highlighted the temporary nature of the controversial Irish backstop clause.

However, overnight and this morning, investors have been digesting the news. As chief lawmaker Geoffrey Cox published new legal advice indicating that this new wording did not change much, the Pound began to quickly shed all of yesterday’s gains.

Demand for the Pound was little changed by the day’s UK data, despite growth beating forecasts in January. This was because Brexit uncertainty dominated the economic and Pound outlooks.

Indian Rupee (INR) Exchange Rates Enjoy March Recovery Rally

Since the beginning of the month, investors have been piling in to the risky sensitive Indian Rupee (INR) despite a lack of supportive data.

The Indian Rupee has regained essentially all of the losses it has seen against major rivals like the US Dollar (USD) so far this year, due largely to seasonal factors.

Continued foreign inflows into domestic equity markets have strongly supported the appeal of Indian markets in general, including the Indian Rupee.

Speculation that Indian Prime Minister Narendra Modi may win an upcoming general election, limited market uncertainty and also supported the Indian Rupee.

However, analysts have noted that the Rupee is unlikely to continue rallying past the end of the fiscal year – so losses may be likely once March is over.

Pound to Indian Rupee (GBP/INR) Exchange Rate Focused on Brexit Developments

While the Pound’s (GBP) recovery attempt yesterday was relatively small compared to last week’s Indian Rupee (INR) rally, the Pound is still most likely to be the primary driver of GBP/INR movement this week.

The biggest focus will remain on Brexit, and UK Parliament’s upcoming meaningful vote on the government Brexit deal.

The deal is still not expected to pass through Parliament amid a lack of support, meaning the Pound could be in for losses amid the market expectation for prolonged Brexit uncertainty.

However, assuming the Brexit deal is blocked again then other upcoming Parliament votes are likely to prove influential instead.

Parliament will hold a vote on whether or not to aim for a no-deal Brexit tomorrow, which is also expected to be blocked. In this scenario, Parliament will vote on a potential time extension to the Brexit process later in the week.

The Indian Rupee is likely to remain fairly appealing as its rally continues, but its movement may also be influenced by upcoming Indian data.

India’s Q4 current account stats will come in on Thursday, followed by trade balance data at the end of the week which could cause some late-week movement in the Pound to Indian Rupee (GBP/INR) exchange rate.

Josh Jeffery

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