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Pound Rises Against Indian Rupee as Market Sentiment Wanes

February 4, 2015 - Written by Tim Boyer

The Pound advanced against the Indian Rupee as renewed worries over Greece’s negotiations with its creditors shook global market sentiment.

Sentiment was weakened following reports that the European Central Bank (ECB) will be unwilling to back the New Greek government’s plans to renegotiate the terms of the nation’s huge bailout. Fears are now growing that the standoff could drag on for months.

The main obstacle to Greece’s plans is Germany who has rejected plans to ease austerity measures. Berlin wants Athens to go back on election promises to raise the minimum wage, halt unpopular sales of national assets, rehire fired public sector workers and reinstate a Christmas bonus for poor pensioners.

‘The Eurogroup needs a clear and front-loaded commitment by Greece to ensure full implementation of key reform measures necessary to keep the programme on track. The aim is the perpetuation of the agreed reform agenda (no roll back of measures), covering major areas as the revenue administration, taxation, public financial management, privatisation, public administration, health care, pensions, social welfare, education and the fight against corruption,’ said a leaked German document.

Earlier in the session, the Indian Rupee found some support from the release of data, which showed that India’s dominant services sector expanded at a faster pace than expected in January. According to the HSBC compiled services PMI, activity in the sector rose to a reading of
52.4, up from the figure of 51.1 recorded in the previous month.

‘The service PMI for January was marked by faster expansions in activities and new orders. Business sentiment led by anticipated improvements in demand and new commercial initiatives rose to a seven month high,’ said Pranjul Bhandari, HSBC’s chief India economist.
Sterling strengthened after a report published by Markit/CIPS showed that activity in the UK’s dominant services sector increased at a faster than expected pace in January.

The Data showed that the Markit/CIPS Services Purchasing Managers Index increased to 57.2 last month from a reading of 55.8 in December. Analysts had expected the index to rise to 56.3 in January.

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The Pound is likely to make further gains against the Indian Rupee as the week progresses as economists will continue to fret over the Greece situation and turn their attention to the Bank of England’s latest interest rate and quantitative easing decisions.

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