- Pound Rupee Exchange Rate Drops from 100.00 to 90.00 – Brexit shocks Pound into huge one-day drops
- Britain in Uncertainty Crisis – PM resigns, Scotland and Northern Ireland may pull out from UK
- Indian Rupee Harmed by Drop in Risk-Sentiment – But gains over unappealing Pound
- Forecast: Concerns Rock UK, India – RBI Governor succession causes anxiety in India
The Pound Rupee exchange rate (GBP/INR) plummeted on Friday following the news that the United Kingdom had voted to Brexit from the European Union. While a drop in risk sentiment weighed on the Indian Rupee, it beat down Sterling and continued to strengthen on Monday.
GBP/INR suffered a considerable drop from levels of around 100.00 to 92.8399 by Friday evening. As of Monday morning, the pair continued to fall in value and currently trends in the region of 89.6700.
Pound (GBP) Throttled by Ongoing Brexit Uncertainty
Friday’s session opened up a slew of new concerns regarding Britain’s long and short term economic future as the UK public made the historic vote to ‘Leave’ the European Union.
In news that shocked markets across the world, the United Kingdom will Brexit and completely change its economic relationships with the majority of global markets, fuelling uncertainty scarcely seen before.
Adding to widespread ongoing uncertainty was news that Britain’s Conservative Prime Minister, David Cameron, was stepping down and expected to have a successor by October.
Not only is the UK’s leadership in question, but UK countries Scotland and Northern Ireland are also speculated to be leaving the UK in order to maintain their EU status.
If one or two of the four UK countries using the Pound were to leave the UK, it would of course have further serious consequences for the Pound and as a result uncertainty has only worsened since Friday.
During Monday’s session, headlines were dominated by crises within the Labour Party, the Conservatives’ major opponent. The BBC reports;
‘Labour leader Jeremy Corbyn has announced a new cabinet following a wave of resignations in protest at his leadership and amid calls to resign.
He lost 12 of his shadow cabinet on Sunday, another on Monday, and several shadow ministers. Most criticised his EU referendum campaign input.
Mr Corbyn said he regretted the walkouts but pledged to stand in any new leadership election.’
Indian Rupee (INR) Advances Despite RBI Concerns
The British Pound dropped across the board in response to the EU Referendum result on Friday. However, the Indian Rupee has experienced its own uncertainty and has struggled to maintain its levels against other majors due to shockwaves from Britain.
Last week, the Rupee was undermined by news that the Reserve Bank of India’s (RBI) Governor, Raghuram Rajan, would not be seeking another term as head after his current term ends in September.
No successor to the position was announced, and with September now almost two months away and Brexit news shaking up the global economy, uncertainty within India’s economy is also rampant.
‘Rajan will hand over the reins in September with inflation accelerating to a 21-month high in May, foreign holdings of local-currency bonds dropping at the fastest pace since 2013, and the Federal Reserve likely to raise interest rates. His successor will need to fend off pressure from Hindu hardliners in the ruling party who accused Rajan of keeping interest rates unnecessarily high.’
The typically risk-sensitive Indian Rupee has also seen mixed favour after risk-sentiment took a hit from the Brexit result. However, distaste for risky currencies slowed on Monday, allowing the Rupee some relief.
Pound Rupee Exchange Rate (GBP/INR) Forecast: When Will Uncertainty Calm?
Both Britain and India’s economies are rife with uncertainty this week, but the UK’s is more likely to extend towards the long-term due to the long and drawn out nature of an EU withdrawal.
According to Reuters, the shortlist of new potential Reserve Bank of India (RBI) governors has been cut to four, meaning the announcement of a successor is unlikely to be much further away.
Markets are certain to react to the announcement by analysing the successor’s past actions and will key in how safe they feel the Indian economy is under their governance.
The successor’s first job will be a tough one, but it is still unknown if the RBI will be making policy changes before September in order to stave off Brexit-related damage.
As for Britain, uncertainty is in full-swing as major political parties go through huge reforms. Markets are also eyeing up how soon the UK government will act on Article 50, or if the action will be put off for an extended period of time.
Sterling is likely to continue falling against the Rupee, especially if the announcement of the RBI’s new governor makes a positive impression on investors.
At the time of writing, the Pound Rupee exchange rate (GBP/INR) trended in the region of 89.6700, while the Rupee Pound exchange rate (INR/GBP) traded at around 0.01115.