GBP/INR Exchange Rate Sinks as Risk-On Markets Boost Indian Rupee
The Pound to Indian Rupee (GBP/INR) exchange rate fell by -0.69% today as improving risk-sentiment has buoyed the Indian currency. The pairing is currently trading around ₹94.00.
The Indian Rupee (INR) has benefited from news that some of Europe’s strongest economies, such as France and Germany, are gearing up to reopen their economies following the bloc’s coronavirus peak.
Analysts at Reuters commented on the recent boost in risk appetite:
‘[Global risk appetite] improved in markets as governments eased lockdowns and U.S. officials said the United States was not looking to take punitive measures against China over the coronavirus outbreak, contradicting President Donald Trump’s threat to impose tariffs on China.’
Meanwhile, India’s own economic outlook is not looking so bright. This follows comments from K.V. Subramanian, India’s Chief Economic Advisor, who said that the nation’s GDP in the first quarter was expected to range between 1% and 2% due to the coronavirus crisis.
Furthermore, India’s services economy suffered its ‘worst ever month-on-month drop in business activity’ last month, according to Joe Hayes, an economist at IHS Markit.
Mr. Hayes concluded:
‘The extreme slide in the headline index, which fell by over 40 points, shows us that the strict lockdown measures have led to the sector essentially grinding to a complete standstill.’
Pound (GBP) Falls as UK Construction PMI Plummets to 8.2
The Pound (GBP) suffered today after Aprils’ UK Construction PMI fell below consensus from 39.3 to just 8.2.
Tim Moore, Economics Director at IHS Markit, commented on the report:
‘The rapid plunge in UK construction output during April stands out even in a month of record low PMI data for the manufacturing and service sectors. Widespread site closures and business shutdowns across the supply chain meant that vast swathes of the construction sector halted all activity in response to the COVID-19 pandemic.’
Meanwhile, news that Downing Street’s chief advisor on the coronavirus, Professor Neil Fergusson, had stepped down after breaching social distancing rules. As a result, this has thrown a spanner into the works of the UK’s handling of the coronavirus crisis and has heightened uncertainties.
Health Secretary Matt Hancock commented:
‘It’s a matter for the police. As a government minister, I’m not allowed to get involved in the operational decisions of police matters. But I think that the social distancing rules are very important and people should be followed.’
Consequently, Sterling continued to struggle today as uncertainty over the UK’s plan to tackle the coronavirus and ease lockdown measures is as yet unclear.
GBP/INR Forecast: Could Sterling Rise as Downing Street Eases Lockdown Restrictions?
Pound (GBP) investors will be looking ahead to tomorrow’s Bank of England (BoE) interest rate decision. Although, if the BoE is notably downbeat in its forecasts for the British economy, then we could see Sterling sink.
However, tomorrow will also see the newly appointed Bank of England Governor, Andrew Baily, deliver a speech. However, hints that the UK economy could be facing an unprecedented slump – which is highly likely during the coronavirus pandemic – would drag down the Pound.
Meanwhile, there are few Indian economic data releases on the horizon. As a result, the Indian Rupee will continue to be driven by global market factors.
In the meantime, GBP/INR exchange rate could edge higher this week if Downing Street announces its lockdown easing plans. As a result, the UK’s economic outlook would brighten as businesses cautiously reopen under lighter restrictions.