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GBP/INR Exchange Rate Rises 0.6% as Crude Oil Prices Skyrocket

April 11, 2018 - Written by Ben Hughes

On Tuesday, the Pound to Indian Rupee exchange rate saw a rise from an initial opening level of 91.7998 in the morning to close higher around 92.1156 in the evening.

The main source of GBP gains was a speech from Bank of England (BoE) official Ian McCafferty, who insisted that the BoE Monetary Policy Committee (MPC) shouldn’t 'dally’ about raising UK interest rates.

Mr McCafferty has historically supported the notion of UK interest rate hikes, but even with this heritage, optimism among Pound traders still rose.

The assumption is that there could be a rate hike as early as May, so Mr McCafferty’s comments come at an appropriate time.

Predictions for a near-term UK interest rate hike have intensified in recent months, following the news that levels of wage growth and inflation are finally reaching an equal footing.

There was little Indian news to refer to on Tuesday’s trading session, with INR losses mainly being caused by a sharp rise in crude oil prices.

As a major worldwide consumer of crude oil, India can struggle economically when prices rise as this leads to greater importing costs.

Spate of Negative UK Economic Data Fails to Prevent GBP/INR Exchange Rate Rise

The Pound to Indian Rupee exchange rate has risen by 0.6% today, making one Pound worth around 92.5861.

This appreciation comes against the odds, with Pound traders largely ignoring poor UK ecostats at the current time.

The first data out showed falling levels of construction, manufacturing and production output in February; the former two readings were month-on-month while the latter was compared to construction levels in February 2017.

Responding to the data, Lee Hopley of the EEF said that;

‘Manufacturing’s recent run of growth came to a halt in February though the picture across sectors was more varied, with some hefty output falls in some key sub-sectors.

Whilst there doesn’t appear to have been an appreciable impact on the sector’s performance from the ‘Beast from the East’ in February, weather-related events may yet have a bearing on the numbers in the coming month however.

Despite this, the data looks more like a temporary wobble than a turn for the worse. Whilst other indicators may have softened since the start of the year, on-going growth in the global economy should continue to spur growth across manufacturing in the coming quarters’.

Another data release that could be damaged by February and March’s snowstorms was the National Institute for Economic and Social Research (NIESR) GDP estimate for March, which showed a 0.2% reading.

In a statement attached to the data release, Head of UK Macroeconomic Forecasting at NIESR, said;

’The main reason for the weakness was severe weather in March which is likely to have disrupted activity in all major sectors of the economy.

There is a small offset in industrial production growth which recovered in the first quarter after the previous quarter was affected by the Fortis oil pipeline shutdown.

Take the quarterly GDP growth for the final quarter of 2010 when the UK experienced a prolonged period of extreme cold weather.

The economy was initially estimated to have shrunk by 0.5% but subsequent data revisions show that the economy expanded by 0.1% over this period’.

Indian Rupee to Pound Exchange Rate Slides as Syrian Conflict Impacts Oil Prices

Much like Tuesday’s trading session, the Rupee to Pound exchange rate has worsened today because the INR has been devalued by an upwards surge in crude oil costs.

Following the news that the US could be planning an imminent missile strike on Syrian government forces after a chemical weapons attack, prices for the commodity have seen a significant rise.

This is due to the risk of conflict in the Middle East reducing availability of crude oil stocks, which drives up the value of the resource and means tougher conditions for Indian importers.

Pound to Indian Rupee Exchange Rate Forecast: Further GBP/INR Gains Possible on UK BoE Speeches

The Pound might be able to extend its gains against the Indian Rupee on Thursday, if Bank of England (BoE) officials Ben Broadbent and Mark Carney both speak in favour of near-term UK interest rate hikes.

On the other side, the Indian Rupee could be further devalued by more crude oil prices rises caused by the Syrian situation, or forecast-matching declines in Indian production levels.
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