Pound Sterling (GBP) to Indian Rupee (INR) Heads to New Lows on Brexit Speculation

September 23, 2016 - Written by James Fuller

STORY LINK Pound Sterling (GBP) to Indian Rupee (INR) Heads to New Lows on Brexit Speculation

The Pound to Indian Rupee exchange rate made quite a strong advance on Thursday as Sterling was boosted by a BoE hawk while the Rupee was weakened by an increase in oil prices. Friday saw the opposite happening, as Brexit speculation undermined the Pound while INR advanced due to oil price drops.

GBP/INR began the week trending in the region of 87.2314 and has generally trended with a downward bias. While the pair briefly recovered to above opening levels on Thursday, GBP/INR had plunged to a new monthly low of 86.7254 by Friday morning.

Pound (GBP) Undermined as Brexit Speculation Flares Up

Sterling’s Thursday sturdiness didn’t seem set to last, as the currency had quickly given up much of its Thursday advances by Friday morning.

The Pound was given a brief boost in demand on Thursday afternoon despite trending limply for most of the week, as markets reacted to hawkish comments made by Bank of England (BoE) policymaker Kristin Forbes.

Forbes, a member of the BoE’s Monetary Policy Committee (MPC), argued that the British economy had seen little real negative effect from the Brexit vote thus far and that she did not see the case for further easing policy in the coming months.
While this boosted Sterling demand on Thursday, fresh comments made by UK government officials on Friday weakened the currency again. Foreign secretary Boris Johnson stated that Britain would ‘probably’ begin the formal Brexit process by activating Article 50 in early 2017.

Early 2017 has long been speculated as the time when Article 50 would be activated, but amid recent speculation that Britain would lose single market access following a Brexit this is bad news to Sterling investors.

Indian Rupee (INR) Given Brief Boost as Oil Prices Dip

Despite trending with a weak bias earlier in the week due to news that India had unexpectedly printed a Q2 current account deficit, and a surge in oil prices, the Indian Rupee looked set to end the week on a higher note.

As India is an emerging market, it often benefits more strongly from lower oil prices as this means easier oil imports. As a result, the Indian Rupee often weakens when oil prices rise.

This is also why the Indian Rupee was able to capitalise on Sterling’s weakness on Friday morning.

Prices of oil had fallen overnight in a profit-taking commodity selloff, and while oil sentiment remained sturdy this allowed the risky Rupee to indulge in the market’s current appetite for risk-correlated currencies.

GBP/INR Forecast: Pound Indian Rupee to End Week Lower

With all the week’s UK ecostats already published, there may be little in the way of incoming data that can soften Sterling’s current falls.

The possibility of influential and optimistic statements on Britain’s Brexit situation, as with Forbes’ comments on Thursday, may be able to give the currency a boost.

Otherwise, the Indian Rupee is more likely to drive movement in GBP/INR for the remainder of the week’s trade session.

The Rupee could continue to trend on its current, strong trajectory vs the Pound if oil prices remain near their current lows, but prices may increase during the American session. The Rupee could also be weakened if incoming foreign reserves stats disappoint markets.

Saving that, the Pound to Rupee exchange rate appears likely to end the week near its lowest September levels.

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