Pound to Indian Rupee exchange rate stronger

January 14, 2015 - Written by James Fuller

STORY LINK Pound to Indian Rupee exchange rate stronger

The Pound advanced against the Indian Rupee due to increased risk aversion following the release of the Global Banks global growth forecasts and concerns that commodity prices are set to tumble further over the next few weeks.

Sterling was supported against a number of major peers and advanced for a sixth consecutive session to reach its highest level in six years against the Euro. The currency strengthened after Bank of England governor Mark Carney eased investor concerns over low UK inflation and highlighted the diverging trends between the Bank of England and European Central Bank. Whilst the European Central Bank looks, set to introduce a quantitative easing programme as soon as next week the Bank of England is looking to end its quantitative easing programme entirely and raise interest rates.

‘Carney made it very clear there’s no more QE on the cards whilst Draghi makes it very clear Quantitative easing is indeed on the cards. It’s the purest form of divergence in the market,’ said Neil Jones, the head of hedge fund sales at Mizuho Bank Ltd.

Data out of India would normally have offered some support to the currency but the sheer scale of the commodity decline and the mounting concerns over global economic growth caused investors to ditch the Rupee in favour of safe haven currencies such as the Pound, US Dollar and Japanese Yen.

Earlier in the session a report showed that plunging oil prices aided India to post a slower than forecast wholesale price inflation report which raised hopes that that the Reserve Bank of India could consider cutting interest rates sooner than expected.

The Wholesale Price Index rose by 0.11 on a year on year basis, beating expectations for a rise of 0.6% by economists. On a monthly basis, wholesale prices remained unchanged.

‘Falls in commodity prices have brought down WPI, CPI alike. All indicators now point that the Reserve Bank of India should cut interest rates by at least 25 basis points in its next policy meeting on February 3,’ said Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance.

The Indian Rupee could recover ground later in the week if commodity prices stage a fight back and global risk sentiment improves. Data is also due that is likely to show that India’s balance of trade improved in December. The nation’s trade deficit s expected to have narrowed from $-16.86 billion to -$14.5 billion.

Update 1) The Pound could make further gains if upcoming House Price Balance data shows signs of improvement.

Update 2) More weak data out of the US could aid the Rupee as demand for the ‘Greenback’ eases.

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