Reduced Risk Appetite Failed to Boost GBP INR Exchange Rate
The appeal of the Pound (GBP) was not boosted by Thursday’s UK retail sales data, which fell short of forecast to clock in at 4.1% rather than 4.4%. This was also a rather weaker figure than in August, suggesting that consumer spending is starting to ease even before rising inflation starts to filter through into the wider economy. As a result, the Pound to Indian Rupee (GBP INR) exchange rate trended lower, with investors remaining bearish on the outlook of the UK economy.
Market appetite for the emerging-market Rupee (INR) was not overly strong, though, with the US Dollar (USD) back on bullish form. The increasing likelihood of the Federal Reserve raising interest rates before the end of the year weighed on demand for the higher-yielding Rupee, limiting its gains against the softened Pound. Further downside pressure also came from the sustained oil price rally, given the large quantities of the commodity that is imported by India.
GBP INR Exchange Rate Forecast: Higher UK Borrowing Could Weaken Pound Further
Sterling volatility seems inevitable as Theresa May attends her first EU summit, with markets liable to react to any fresh comments on the subject of Brexit. As researchers at BBH noted:
‘While Brexit may not be formally on the agenda, it will be among the 800-pound gorillas in the room (alongside national politics, which could produce new governments France, Germany, Netherlands, and possibly Italy). For many EU leaders, there can be no soft Brexit, if that means the UK retains access to the single market and limits EU migration.’
Should a harder line continue to be taken on the issue the GBP INR exchange rate is likely to weaken further ahead of the weekend. Brexit-based anxiety could also be exacerbated if September’s public sector net borrowing report indicates that the UK government continued to borrow heavily. With the UK’s wide deficit the subject of some concern an upside surprise here could see the Pound extend its slump further.
Muted risk sentiment could continue to hamper the Rupee in the near term, although a lack of fresh US data on Friday may offer an opportunity for a rally. With oil prices unlikely to continue trending higher in the absence of more substantial support the GBP INR exchange rate could remain on a downtrend.