Stronger Indian Inflation Failed to Dent GBP EUR Exchange Rate
A sharper-than-expected decline in the Indian inflation rate failed to particularly weigh on the GBP INR exchange rate on Thursday. Although inflationary pressure eased from 5.05% to 4.31% the limited risk appetite of investors prevented the Rupee from strengthening in response. As a result the GBP INR exchange rate was trending higher at 81.73 towards the close of the European session.
(Previously updated at 10:00 13/10/16)
Brexit Jitters Continued to Hamper GBP INR Exchange Rate Outlook
Although the Pound (GBP) recovered some ground on the back of news that Parliament would be debating the terms of Brexit before the beginning of the formal exit process this optimism proved short-lived. Investors were soon deterred by the persistent hard line taken by government politicians on the matter and the continued prospect of single market access being lost.
Despite the RICS House Price Balance bettering expectations to clock in at 17% in September this was not enough to bolster the appeal of Sterling on Thursday morning. Domestic data remains of limited influence, particularly as tensions have flared between Tesco and major brand supplier Unilever over a proposed 10% wholesale price increase.
Confidence in the Rupee (INR), meanwhile, was a little rattled by the release of the Federal Reserve’s latest set of meeting minutes. These were seen to boost the odds of policymakers voting to raise interest rates before the end of the year, shoring up the US Dollar (USD) and diminishing general market risk appetite. Nevertheless, the Pound to Indian Rupee (GBP INR) exchange rate remained on a narrow downtrend.
GBP INR Exchange Rate Forecast: Weaker Indian Inflation Predicted to Boost Rupee
Volatility for the Rupee is likely on Thursday afternoon in response to September’s Inflation Rate. Should inflationary pressure be found to have dipped back towards the Reserve Bank of India’s (RBI) target range then the GBP INR exchange rate is expected to weaken further. However, if the RBI’s monetary easing continues to show a limited impact on the domestic inflationary outlook the Rupee could be softened.
Brexit-based worries are expected to maintain downside pressure on the Pound for the foreseeable future, with Sterling remaining particularly sensitive to any political commentary. Even so, as researchers at BNP Paribas noted:
‘We continue to see scope for the GBP to bounce on positive news surprises given extreme short positioning and very cheap GBP valuations. […] We are heading into crunch time for the GBP as the various parties stake out negotiating positions, so we would expect news flow to remain rather challenging in the near-term.’
Some increased measure of support could materialise ahead of the weekend, providing that August’s latest UK construction output figures show a solid rebound after July’s sharp slump. A positive surprise from the data may give the GBP INR exchange rate fuel for a rally, albeit a likely temporary one.
Current Interbank Exchange Rates
At the time of writing, the Pound to Indian Rupee (GBP INR) exchange rate was trending narrowly at 81.45, while the Indian Rupee to Pound (INR GBP) pairing was trending in the region of 0.01.