Pound to Indian Rupee Exchange Rate Volatile amid Brexit Developments and Lower Oil Prices
Despite the Pound’s (GBP) attempt at a Tuesday recovery on signs that a Brexit deal was imminent, the Pound Sterling to Indian Rupee (GBP/INR) exchange rate ultimately slipped on Wednesday as Brexit jitters worsened again and risk-sentiment supported the Indian Rupee (INR).
Stronger demand for risky, emerging market currencies like the Rupee has kept GBP/INR under pressure this week.
GBP/INR opened the week at the level of 94.25 and despite a brief Tuesday recovery to 94.55 the pair has largely trended with a downside bias. At the time of writing on Wednesday, GBP/INR was trending near a two month low of 93.34.
On Wednesday morning, investors sold the Pound amid concerns that UK Prime Minister Theresa May’s government cabinet would not approve of the UK-EU Brexit draft text, which could make the chances of Parliament backing even less likely.
The Indian Rupee was able to benefit from Pound weakness, as the emerging market currency has been stronger on falling oil prices.
Pound (GBP) Exchange Rates Hit by Brexit Jitters and Slower Inflation
On Tuesday evening, it was confirmed that the UK and EU had finally created a draft text of a Brexit agreement. At around 500 pages, the text is set to be presented to UK Prime Minister Theresa May’s government cabinet today.
While the formation of a deal would typically have bolstered Sterling demand, concerns about domestic support for the Brexit plan have exacerbated in recent sessions.
Markets are becoming concerned that even if a UK-EU Brexit summit is held before the end of the month, a potential Brexit bill could still be blocked by UK Parliament and prevented from entering law. This could lead to a ‘no-deal Brexit’.
Criticism of the supposed deal from opponents and backbenchers has worsened concerns that the cabinet may not react positively either.
On top of Wednesday’s volatility and uncertainty on Brexit, demand for the Pound was unlikely to have been helped at all by news that UK inflation fell short of expectations in October.
Indian Rupee (INR) Exchange Rates Boosted by Risk-On Movement
While market appetite for risky emerging market currencies like the Indian Rupee (INR) has been mixed in recent weeks, a brief surge in risk-on has helped the Rupee to strengthen since Tuesday.
Global oil prices slumped on Tuesday, as markets became concerned with comments from US President Donald Trump. Trump warned Saudi Arabia and OPEC not to cut oil production in order to stimulate prices.
This dampened speculation that OPEC could agree to significant oil production cuts soon. Instead, concerns about rising supply and fading demand kept prices weaker.
As India is an emerging market that typically benefits from lower commodity prices, this news bolstered demand for the Indian Rupee.
The Rupee also found support in news that the Reserve Bank of India (RBI) would buy 120b Rupees of government bonds via open market purchases.
Pound to Indian Rupee (GBP/INR) Exchange Rate Investors Eagerly Anticipate Brexit Developments
The next few days are likely to be highly significant for Brexit developments and could result in some major Pound movement, and could inevitably mean a shift in direction for the Pound to Indian Rupee (GBP/INR) exchange rate outlook.
Regardless of how global risk-sentiment or oil prices develop and influence the emerging market Indian Rupee in the coming sessions, the Pound is far more likely to drive GBP/INR movement.
Reaction to the UK Cabinet meeting on Wednesday afternoon could drive Sterling for the rest of the week, especially if there are no further Brexit developments on Thursday or Friday.
If UK Prime Minister Theresa May’s government cabinet shows mostly solid support for the UK-EU draft text, the Pound could surge as investors would become more confident that the deal may be able to pass through UK Parliament.
However, if the meeting leads to any resignations or ramped up criticism of the deal from PM May’s cabinet, Sterling will plunge instead.
Thursday will see the publication of Britain’s October retail sales and India’s October trade balance stats, but Brexit news will remain in focus for the Pound to Indian Rupee (GBP/INR) exchange rate outlook.