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Pound to Indian Rupee (GBP/INR) Exchange Rate Drops -0.3% after UK Consumer Confidence Slides

July 31, 2018 - Written by Tim Boyer

Monday saw the Pound to Indian Rupee exchange rate open in the region of 89.9734 and after daily fluctuations, close up slightly higher around 90.2067.

There was limited high-impact UK economic data out on Monday, so instead the GBP/INR exchange rate was boosted by speculation about the Bank of England (BoE).

The UK central bank will make its August interest rate decision on Thursday this week and some economists believe that a rate hike from 0.5% to 0.75% is likely.

This isn’t an assured outcome, but given the Pound’s more favourable trading against the Rupee on Monday the implication is that GBP traders were hoping for a hike.

Pound Sterling to Indian Rupee (GBP/INR) Exchange Rate Worsen as UK Confidence Levels Drop

Today has seen the Pound to Indian Rupee (GBP/INR) exchange rate drop by -0.3%, down to a level of 89.8682.

Looking back, this is the lowest level on the GBP/INR exchange rate in over a week.

The Pound’s losses today are mainly down to low GBP trader confidence, in the wake of disappointing UK consumer sentiment data.

GfK’s reading for July has declined from -9 points to -10, instead of reprinting at -9 points as forecast.

While factors such as a heatwave and events like the World Cup and Wimbledon would usually boost sentiment and spending levels, the reading shows that pessimism has still won out.

Topping off the data release with a particularly negative forecast, GfK Client Strategy Director Joe Staton said:

‘In this environment, any bad news such as a surprising uptick in inflation with the expectation of a corresponding increase in interest rates, or any adverse political event either at home or abroad, would likely have an exaggerated downward drag on consumer confidence.’

Indian Rupee to Pound (INR/GBP) Exchange Rate Rises on Higher Industrial Output and Resilient Outlook

While the Pound (GBP) may have struggled today, the Indian Rupee (INR) has had no such difficulties and has advanced in the pairing.

The latest good news out of India has included June’s annual infrastructure output reading, which has risen from 4.3% to 6.7%.

This measures productivity in Indian factories and mines, in addition to factoring in construction sector activity and energy production.

Another piece of support has been the assessment by ratings agency Crisil that the Indian economy is well-positioned to handle future economic risks.

Commenting on the current state of the Indian economy, Crisil economists said:

‘Though most of India’s macro parameters have seen some strain lately, they also appear resilient when compared with the 2013 ‘taper tantrum’, and in better shape than other emerging markets to negotiate the latest onslaught of global risks.’

Pound to Indian Rupee (GBP/INR) Exchange Rate Volatility Forecast on PMIs and BoE Decision

Sticking with the Pound (GBP) for now, the UK currency could be affected over the rest of the week by UK PMI data (over Wednesday to Friday) and Thursday’s Bank of England (BoE) interest rate decision.

Outside of any BoE influence, the PMI readings for UK manufacturing, construction and services sector activity could weaken the Pound if they show slowdowns as forecast.

There may be a turnaround in GBP/INR trading on Thursday, however, if the BoE commits to higher UK interest rates and boosts demand for Pound Sterling.

It is worth mentioning other outcomes, however – if the BoE raises interest rates but suggests that no more are likely in the near-term, GBP/INR gains could be limited.

On the other side, if BoE policymakers leave interest rates unchanged then the Pound could drop sharply against the Rupee due to widespread disappointment.

Speaking of central banks, the Reserve Bank of India (RBI) will be making its next interest rate decision a day earlier on Wednesday, which could push the INR/GBP exchange rate higher.

In the face of inflationary pressures, the RBI is expected to raise interest rates from 6.25% to 6.5%.

While this will increase the difficulties faced by those in debt, the move could still trigger a Rupee advance as it would combat inflation and improve the situation for savers.
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