Pound to Rupee Exchange Rate Today: GBP/INR Falls to Lowest Level Since August 2013

November 12, 2014 - Written by Ben Hughes

STORY LINK Pound to Rupee Exchange Rate Today: GBP/INR Falls to Lowest Level Since August 2013

The Pound (GBP) exchange rate tumbled to a more than one-year low against the Indian Rupee (INR) on Wednesday due to a combination of positive economic data out of India and a dovish report by the Bank of England.

Sterling tumbled against all of its most traded peers after the Bank of England inflation report weakened sentiment towards the currency.

The central bank warned that the UK’s inflation rate could slip below the 1% level over the course of the next six months and that economic growth will be softer due to the weakness of the Eurozone.

Earlier in the session, the Pound briefly advanced after official figures showed that average wages outpaced inflation for the first time in five years and the number of Britons out of work declined by 115,000 in the three months to the end of September.

Pound Sterling to Rupee Exchange Rate Plunges

The GBP/INR exchange rate then tumbled sharply as the BoE cut its growth forecasts for the next two years, issued its warning over inflation rates and said that interest rates are not expected to rise until late next year and even then the rise will be limited.

The Indian Rupee surged against Sterling and made gains against other major peers after a report showed that industrial production surged in September. The data published showed that production increased by a stronger than expected 2.5% after consumer demand was boosted by a major religious festival.

The official report showed that output from mines, factories and utilities surged from the same period last year.

The stronger than forecast data is expected to improve the outlook for Asia’s third largest economy, which is still struggling to recover from a period of low economic growth.

A separate report meanwhile showed that Indian retail inflation slowed to 5.52% in October from the previous figure of 6.46% as the price rises of food slowed and fuel prices continued to fall.

The easing of price pressures is likely to put more pressure on the Reserve Bank of India to cut interest rates in a bid to stimulate consumer spending. Consumer demand accounts for 60% of the Indian economy.

If the RBI does choose to cut rates, the Rupee is likely to see gains.

‘A rate cut at this juncture will no doubt add to the existing positive growth impulses. But such a move would also increase the risk that the RBI misses its inflation target... to return inflation back to the level last seen in the period between 1999 and 2005, when CPI inflation averaged just 4%,’ said Prithviraj Srinivas, an economist at HSBC.

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