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GBP to INR Exchange Rate Hits Multi-Week-High as UK Services Report Beats Forecasts

July 4, 2018 - Written by Toni Johnson

While the Indian Rupee has rebounded from its recent lows against the US Dollar this week, its gains have not been enough to help it hold against a strengthening Pound. The British Pound to Indian Rupee (GBP/INR) exchange rate advanced thanks to UK data on Wednesday, hitting its best levels in weeks.

Despite Brexit jitters weighing on Sterling, last week saw GBP/INR climb from 90.04 to 90.42 as trade jitters weighed even more heavily on the Indian Rupee. This week so far, GBP/INR has continued its climb thanks to solid UK data. On Wednesday, GBP/INR trended near a high of 90.85 – the pair’s best level since mid-June.

GBP Support Strengthens after Hat Trick of Strong UK PMIs

Wednesday saw the publication of Britain’s June services PMI from Markit. Not only did the report beat forecasts, it rounded off a trio of better than expected UK PMIs for June, giving Pound traders reason to be a little more optimistic about Britain’s economic outlook.

The services PMI was forecast to remain at 54.0, with some economists even predicting that the print would slow in June. However, the figure unexpectedly jumped to 55.1 – the print’s best figure in seven months.

Following the report, investors became more confident that Britain’s economy had rebounded following the poor performance seen earlier in the year. Bank of England (BoE) interest rate hike bets rose, and the Pound strengthened.

According to Malcolm Barr from JPMorgan, more and more economists are becoming convinced by the case for a UK interest rate hike in the BoE’s August policy decision:

‘Taken as a whole, the business survey data for June lend more weight to the idea that the weakness in growth reported for 1Q was temporary: our version of the composite PMI has recovered to sit slightly above its average, having been a couple of points below it in March. Indeed, the weakness in the reported IP data through to April is looking increasingly like an outlier in the data. We continue to look for the MPC to raise rates in August, and see the dataflow and recent MPC commentary as raising confidence in that view.’

Britain’s services PMI is typically influential, as services make up a considerable portion of Britain’s economic activity.

It followed Monday’s stronger than forecast UK manufacturing results and Tuesday’s construction figures.

However, some economists did note that there were still signs of economic slack, as well as broad Brexit uncertainties, weighing on business optimism and keeping the UK economic outlook murky.

INR Rebounds from Worst Levels Despite Trade Uncertainties

Demand for the Indian Rupee remained limited on Wednesday, but the currency did limit its losses against rivals as some investors continued to buy it back from its recent lows against the US Dollar (USD).

Last week, the Indian Rupee hit its worst levels on record against the US Dollar (USD), and since then the Rupee has seen a relatively sturdy rebound.

However, global trade jitters keep pressure on the Indian Rupee and limited its recovery.

Investors have remained concerned that the controversial trade tariff plans being pushed by the US could have a negative impact on the economies of some emerging markets, like India – or lead to a global trade war.

This uncertainty has kept a cap on Indian Rupee trade. Not even this week’s Indian PMI results from Nikkei, which beat forecasts, have helped the Rupee to hold its ground against Sterling.

GBP/INR Forecast: Bank of England (BoE) Governor Speech Ahead

Could the Pound to Indian Rupee exchange rate continue to climb for the remainder of the week, or will the Indian Rupee be able to hold its ground?

As the Rupee is still pressured by trade uncertainty, it is unlikely that GBP/INR will fall far even if the Indian Rupee recovery rally resumes.

On the other hand though, the Pound to Indian Rupee exchange rate is unlikely to strengthen much either. Investors will be hesitant to let the Indian Rupee fall to new major lows.

Still, Thursday will see Bank of England (BoE) Governor Mark Carney hold a speech and if the speech has an impact on BoE interest rate hike bets the Pound could see another shift in movement towards the end of the week.

Friday will see the publication of UK labour productivity data and India’s latest foreign exchange reserves, deposit growth and bank loan growth figures.

Ultimately, Bank of England interest rate hike bets, Brexit developments and US trade news will drive GBP/INR movement for the remainder of the week.
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