Pound to Indian Rupee Advances on Services PMI and Oil Price Rise

May 6, 2015 - Written by Toni Johnson

STORY LINK Pound to Indian Rupee Advances on Services PMI and Oil Price Rise

Pound to Indian Rupee Advances on Services PMI and Oil Price Rise

The Pound Sterling firmed against the Indian Rupee following the release of economic data, which showed that the UK’s services sector grew at its strongest pace in eight-months in April. The Indian currency also came under pressure as oil prices jumped to the highest levels of 2015 so far.

Sterling advanced after the Markit/CIPS compiled Services Purchasing Managers Index (PMI) strengthened to a reading of 59.5 in April, up from the preceding month’s figure of 58.9 and was the biggest rise seen in eight-months. In a PMI, any figure above 50 indicates expansion, whilst a number below indicates contraction.

‘Fears of the economy slumping amid election jitters are allayed as an upturn in service sector activity has helped offset sharp slowdowns in both manufacturing and construction. The PMI surveys suggest the economy is showing robust growth momentum, expanding at a rate of 0.8% at the start of the second quarter. As such, it looks like the economy has rebounded from the weakness seen at the start of the year. But there are warning lights flashing about the sustainability of growth, and any new government is faced with the challenge of boosting business confidence and reviving investment in particular,’ said Markit’s chief economist Chris Williamson.

Growth in the sector, which accounts for roughly three-quarters of the UK economy and includes areas such as bars, restaurants and transport, was stronger than economists were predicted, hitting an eight-month high in April.

In the Asian session, the Indian Rupee had begun the day stronger against the US Dollar and other major peers, but the gains were short-lived due to heightened Dollar demand from Indian banks and importers. The currency was also weakened by weak equities and a surge in crude oil prices. As India is one of the world’s top oil importers, the rise in price is seen as a drag on the Indian economy and Rupee.

Oil prices advanced by more than $1 as the US Dollar was weakened by another bout of soft domestic economic data and as a disruption to crude oil supplies from Libya dented supply. Concerns over the conflict in Yemen also weighed as news broke that Houthi rebels launched artillery attacks towards Saudi Arabian territory. In Libya, protests have stopped crude flows to the eastern port of Zueitina. Libyan output is currently below 500,000 barrels per day, a third of what the country pumped before 2010.

The currency pair will experience volatility on Thursday as Brits hit the polling booths for the general election.

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