GBP INR Exchange Rate Predicted to Slide if UK Wage Squeeze Continues

April 7, 2017 - Written by Tim Boyer

STORY LINK GBP INR Exchange Rate Predicted to Slide if UK Wage Squeeze Continues

Poor Week of GBP INR Trading Ends with Trade Deficit Expansion

As well as being devalued by falling PMIs this week, the Pound has also fallen against the Indian Rupee on recent trade balance figures.

The previous trade deficit was revised up to -2.98bn; this was worsened with stats showing an expansion to -3.66bn in February.

Sterling has been dragged further down by industrial production data, which has slowed against expectations.

GBP INR Forecast: Sterling Slide Possible on Growing Inflationary Pressures Next Week

The Pound may drop heavily against the Rupee next week, depending on the outcome of inflation and earnings data.

Tuesday will bring inflation rate figures for March, which previously exceeded the Bank of England (BoE) target of 2% in February. If the 2.3% figure rises further next week, the Pound may then slide on Wednesday’s average earnings stats.

These formerly showed a slowdown in wage growth; if the rate of inflation continues to outstrip earnings then heavy GBP INR losses are possible.

This is due to the Bank of England’s (BoE) reluctance to act on rising inflation due to the wages situation, although rapid inflation will still put pressure on the bank to respond.

INR Update: Improving Services Sector Counters Crude Oil Price Hike

The Rupee has repeatedly gained against the Pound this week, being bolstered by a flagging Sterling as well as strong domestic data.

In the latter case, Thursday’s services PMI showed a move away from contraction by rising from 50.3 to 51.5.

The reception to this data was so positive that even a sharp rise in crude oil prices failed to drag INR demand down.

This came late in the week, in response to the US attacking a Syrian airbase, following a chemical weapons incident on Tuesday.

Weekly INR Forecast: Losses Likely if US-Syria Action Drives Up Oil Prices

As well as domestic data, the Rupee could be strongly influenced next week by further hostile interactions between the US and Syria.

As the largest crude oil exporter in the Eastern Mediterranean, Syria’s oil reserves can have a strong influence on global prices. If the US undertakes further military action against the Syrian regime, this could drive the cost of crude up further, to the detriment of the Indian economy.

On the homefront, the Rupee could be shifted by inflation figures on Wednesday and trade balance data on Friday. The current Indian inflation target is in the region of 4%; previous results in February put the rate at 3.65%.

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TAGS: Daily Currency Updates Pound Rupee Forecasts