Pound Indian Rupee (GBP/INR) Exchange Rate Hits Nine-Month High on UK Election Bets

Latest UK Polls Encourage Pound Sterling Indian Rupee (GBP/INR) Exchange Rate Surge

As the polls continued to point towards a Conservative lead ahead of next week’s election the Pound Sterling to Indian Rupee (GBP/INR) exchange rate gained fresh ground.

Although Pound Sterling (GBP) lost some of its momentum this morning the GBP/INR exchange rate still hit its highest level since February thanks to bets of the election resulting in a majority government.

While a Conservative majority would appear to increase the risk of a hard Brexit scenario this failed to weigh down GBP exchange rates at this stage.

However, the Pound lost some of its positivity thanks to another negative month of UK new car sales, which fell -1.3% on the year in November.

With UK consumers showing signs of caution ahead of the election result confidence in the health of the fourth quarter gross domestic product remains muted.

Surprise Lack of Action from RBI Fuels Indian Rupee Losses

Support for the Indian Rupee (INR) weakened, meanwhile, after the Reserve Bank of India (RBI) surprised markets by leaving interest rates on hold.

While markets had widely expected the central bank to cut interest rates from 5.15% to 4.90% policymakers instead opted to hold steady at their final meeting of 2019.

As the possibility of future monetary policy easing remained on the table, with the RBI reiterating its desire to maintain an ‘accommodative’ stance, the mood towards the Rupee soured.

Markets were also disappointed to find that the central bank had lowered its fiscal year growth forecast from 6.1% to 5.0%.

With confidence in the outlook of the Indian economy weakening in the face of ongoing global trade tensions INR exchange rates saw little cause for positivity.

Growing General Election Jitters Forecast to Put Dampener on GBP/INR Exchange Rate

Mounting anticipation for the general election result could put pressure on the GBP/INR exchange rate in the coming days, however.

As the potential for an upset remains the Pound may struggle to gain further ground against its rivals in the near term, with the impact of a Conservative majority already effectively priced in.

The relative strength of GBP exchange rates creates the potential for a sharp decline in the event of a different election result, though.

Renewed market anxiety over Brexit could also put a dampener on the Pound next week, with the issue of the UK’s future relationship with the EU still far from resolved.

Global Trade Worries Set to Limit INR Exchange Rate Potential

If the White House continues to double down on its latest bout of trade belligerence this could weigh down the Indian Rupee.

Increasing anxiety over the global trade outlook looks set to keep the risk-sensitive Rupee under pressure, with weaker trade likely to drag on the Indian economy.

As long as the US-China trade dispute looks set to drag on into another year INR exchange rates may struggle to find any particular traction.

With the threat of further US tariffs still hanging over markets the potential for an Indian Rupee rally appears limited in the near term.

Louisa Heath

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