Pound to Rupee Exchange Rate - GBP INR Lower as PMI's Slide in September

October 1, 2014 - Written by Toni Johnson

STORY LINK Pound to Rupee Exchange Rate - GBP INR Lower as PMI's Slide in September

The Pound to Rupee exchange rate (GBP/INR) has been weakening on Wednesday after both the UK and Indian Manufacturing Purchasing Managers Indexes (PMI) fell short of economists’ predictions.

The Pound has tumbled against other majors on the release of figures demonstrating a cooling in the manufacturing sector while the emerging-market Rupee has remained relatively stable in its exchange rate.

However, the Indian currency may dip in the remainder of the European session as markets price in the fall for manufacturing.

Pound vs Rupee Altered by Manufacturing PMI

The Rupee has made advances versus the Pound on Wednesday after both India and the UK saw their Manufacturing PMI figures shrink. Despite both nations still recording expansion in the sector with figures over 50, the softening in both was more extensive than economists’ had forecast. India’s HSBC Manufacturing PMI was recorded at 51.0 in September, a shade lower than August’s 52.4. Meanwhile, the UK’s Manufacturing PMI slipped to 51.6 in September from 52.2.

The prospect of UK interest rate hikes taking place sooner rather than later became more prominent yesterday after UK Gross Domestic Product (GDP) figures saw a positive revision to 0.9% from 0.8%. However, with Manufacturing PMI falling on Wednesday, many economists have suggested that a patient approach to increases in borrowing costs will prove more favourable for the UK economy. Markit economist Rob Dobson commented: ‘September’s disappointing reading will therefore add to the air of caution as to whether the economy is ready for higher interest rates.’

For India, Wednesday’s figure denotes the eleventh consecutive month of growth in the manufacturing industry; however, it also signalled the slowest growth rate in the last nine months. HSBC representative Frederic Neumann commented: ‘Manufacturing activity continues to slow amid weaker output and new order flows. Responding to the slowdown, firms lowered purchases and trimmed inventories.’

Meanwhile, another issue in India is the high level of domestic inflation. The Indian central bank decided this week to keep interest rates the same for the fourth consecutive meeting as attempts to revive the manufacturing sector continue. September highlighted signs that inflationary pressures were easing in the economy, however, which has led to speculation from economists. Neumann continued: ‘The central bank is likely to look beyond the near term moderation and keep policy rates elevated so as to reign in entrenched inflation expectations.’

GBP/INR Rate Forecast Today

The UK will release Markit Construction PMI and the latest Bank of England Financial Policy Committee’s statement on Thursday which will see the discussion of current monetary policy.

Any hawkish remarks from members could impact the Pound’s exchange rate whilst dovish comments could cause Sterling losses.

Friday, however, will prove more influential for both sides of the GBP to INR exchange rate with both nations publishing several reports. India will release Deposit Growth, Bank Loan Growth and Foreign Reserves figures, whilst the UK will see the release of Composite and Services PMI.

Pound to Indian Rupee (GBP/INR) Exchange Rate Softening – UK Data Expected to Fall

The Pound to Indian Rupee exchange rate has been trending lower on Thursday ahead of the market closure (Thursday to Monday) for an extended holiday.

The Pound, meanwhile, may fluctuate on Thursday from the release of Markit’s UK Construction Purchasing Managers Index. UK Composite and Services PMI are scheduled for release on Friday which may see Sterling losses as both are expected to slip in September.

Any faltering in UK data will support the dovish Bank of England members who have stated there needs to be patience before hiking interest rates.

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