Pound to Rupee Exchange Rate (GBP/INR) Tumbles Along With Basket of Currencies

August 13, 2014 - Written by James Fuller

STORY LINK Pound to Rupee Exchange Rate (GBP/INR) Tumbles Along With Basket of Currencies

GBP/INR – The British Pound to Rupee exchange rate saw losses on Thursday as Sterling continued to struggle following yesterday’s disappointing wage growth report. The Indian currency received some support after wholesale price inflation fell to a five-month low. The wholesale price index (WPI) rose 5.19% year-on-year last month, its slowest pace since February, and compared with a 5.10% annual rise forecast by economists.

The Indian Rupee advanced by 0.70% on Wednesday as the Pound took a bettering from the release of disappointing wage growth data.

Earlier in the session, the Rupee made its largest decline in a week against the US Dollar and other peers as data released on Tuesday showed that inflation in the country quickened more than forecast. Adding to the currency’s drop was a separate report, which showed that factory output missed economist expectations.

According to the data, consumer prices increased by 7.9% in July from the previous year and were higher than the 7.4% figure widely expected by economists. The increase was also the biggest seen in two months.

“The jump in inflation is disappointing. Though industrial production growth disappointed, a deteriorating inflation outlook will effectively tie the hands of the Reserve Bank of India,” said an economist from ANZ.

A separate report showed that industrial production in the Asian country rose by 3.4% in June, a number, which was below the 5.6% increase forecast by analysts. Despite the weak data releases, many observers believe that the Reserve Bank of India will choose to leave interest rates unchanged for the remainder of the year. Any rate rise or cut is next likely to occur next March.

"The subdued growth in factory output and rise in retail inflation are a clear pointer that it is early days for seeing a decisive rebound in industrial growth and reversal of inflation. The data suggests that some bold measures are required to instill the real confidence among the consumers and investors. High interest rates, high corporate debts and risk aversion remain worrying areas," said ," Assocham President Rana Kapoor.

The Pound meanwhile made sharp declines against the majority of its major peers after data showed that UK wage growth declined. The Bank of England also slashed its wage growth forecasts, which in turn caused investors to reduce their bets for an interest rate rise to occur before the end of the year.

Bank of England governor Marck Carney also reasserted that when rate rises do occur they would do so gradually.

“The market is pushing back its interest-rate hike expectations well into 2015. That is the key why the Pound is being sold across the board. There was some expectation and pre-announcement bullishness, however, given the downward revision in wage projections and the gradual and limited words again, the market is selling the Pound,” said Neil Jones, the head of hedge-fund sales at Mizuho Bank Ltd.

The Indian Rupee is likely to experience volatility on Thursday with the publication of the latest Producer Price inflation and Balance of Trade data. Economists are expecting the nation’s trade balance deficit to have narrowed in July and producer price inflation is forecast to have weakened.

Sterling could regain lost ground on Friday if the latest UK GDP data comes in positively. Economists are expecting quarter on quarter growth to come in at 0.8% and year on year growth to have expanded to 3.1%.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: American Dollar Forecasts Currency Predictions Daily Curre Forecasts