Indian Trade Balance Misses, Prompts GBP/INR to Jump
The GBP/INR exchange rate is trending higher today in the wake of some disappointing trade figures from India.
At the time of writing GBP/INR is currently up 0.36%, with the pairing striking its highest levels since October.
Indian Rupee (INR) Slips as Trade Figures Disappoint
The Indian Rupee tumbled at the start of this week’s session as investors reacted to India’s latest trade balance figures.
Government data revealed that the nation’s trade deficit climbed from -$13.83bn to -$14.88bn in December, disappointing investors who had forecast that the deficit would narrow to $12.37bn.
The deficit was largely driven by a strong uptick in imports, which rose over 20% year-on-year.
Officials are confident that the balance will begin to improve in 2018 however as recent data shows a sharp uptick in exports to China, with this trend possibly fuelling a narrowing in the deficit.
GBP Investors Await UK Inflation Figures
Meanwhile GBP investors await publication of the UK’s latest CPI figures on Tuesday.
Economists forecast that UK inflation will have dipped from a five-year high of 3.1% to 3% in December.
The drop in inflation may strengthen Sterling as it would help to close the gap with wage growth, relieving financial pressure on UK households and hopefully allowing consumer spending to rebound over the coming months.
With a large portion of the UK’s growth being derived from spending, this may also help to shore up GDP in 2018.
However the dip could also prove negative for the Pound if investors feel that the retreat in inflation is likely to dent the chances of the Bank of England (BoE) raising interest rates in 2018.
A dip back to 3% would place inflation back within the BoE’s target rate of 2-3%, granting the bank a little more breathing room to leave rates on hold.
GBP/INR Exchange Rate Forecast: Markets Likely to Remain Sensitive to Brexit
Looking ahead outside of the UK’s inflation data the main influence on the GBP/INR exchange rate is likely to be developments in Brexit, with Sterling likely to tumble if the government continues to learn towards a ‘hard’ Brexit.
Meanwhile the Indian Rupee may be able to recoup some of its losses later in the week should investors remain dovish against the US Dollar (USD).
The weakness of USD is causing markets to increasingly investing in emerging currency’s as traders look to take advantage of the higher yields on offer.