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GBP to INR Exchange Rate Jumps to Yearly High Thanks to Barnier?s Brexit Comments

September 10, 2018 - Written by David Woodsmith

The Pound’s bullishness continued on Monday, thanks to yet more bullishness from EU Chief Negotiator Michel Barnier. Barnier’s comments helped the British Pound to Indian Rupee (GBP/INR) exchange rate to touch its best levels in over a year, as the Indian Rupee continues to see broad losses.

Last week saw GBP/INR climb solidly thanks to Brexit hopes and weakness in emerging market currencies, and the pair rose from 91.75 to 93.17. If GBP/INR holds Monday’s gains it could be in for another bullish week. On Monday afternoon, GBP/INR jumped to touch a high of 94.43 – the pair’s best level since the 2016 Brexit vote.

GBP Once Again Supported by Barnier despite Domestic Brexit Uncertainties

Despite concerns that splits within the UK Conservative Party could prove to be a considerable obstacle for the Brexit process, investors bought the Pound in reaction to perceived progress in UK-EU Brexit negotiations instead.

EU Chief Negotiator Michel Barnier, whose comments have been a common source of Pound strength over the past week, offered yet more comments on Monday that markets perceived as optimistic.

Barnier surprised Pound investors on Monday by saying that it was ‘possible’ and even ‘realistic’ for the UK and EU to reach a Brexit deal within just eight weeks.

He expressed confidence that while many issues remained regarding the Irish border and protections for names of food and agriculture products, a deal could be reached by November.

Speculation has also risen that the EU is looking at potential concessions to make in negotiations in order to make sure a deal is met.

The latest Brexit news and speculation was the biggest cause of Pound gains throughout the day, but Britain’s latest key UK data offered Sterling some support too.

Britain’s July Gross Domestic Product (GDP) growth rate beat forecasts, unexpectedly rising from 0.1% to 0.3% rather than the expected 0.2%. The figure for the three months into July printed at a solid 0.6%.

Britain’s July trade balance report beat forecasts too, with the deficit lightening to £-0.111b rather than deepening to the expected £-2.1b.

Still, uncertainties remained in the UK economic outlook, especially in the factory sector. According to Lee Hopley, Chief Economist at EEF:

‘While not quite in rude health, the economy does look to have been on the up over the summer with consumers spurred on by some good weather and modest increases in real wages. Export demand also looks to have been a bit more supportive, consistent with some of the survey evidence over the summer. It is still unclear that there is enough momentum here to counteract what feels like a rising tide of uncertainty about Brexit and global trade policy concerns.’

Sterling was also held back by domestic Brexit uncertainties, amid reports as many as 80 MPs in the ruling Conservative Party could vote against UK Prime Minister Theresa May’s Brexit plan.

INR Kept Under Pressure as Emerging Market Currencies Remain Unappealing

Due to a lack of supportive Indian news, as well as stronger prices of commodities and geopolitical trade jitters, investors have been hesitant to buy risky emerging market currencies like the Indian Rupee.

Emerging market currencies have suffered broad weakness in recent weeks due to concerns about how US trade protectionism could negatively impact emerging economies.

As a result, news that US President Donald Trump planned to put tariffs on almost all US imports of Chinese goods left investors even more hesitant to buy the Indian Rupee.

This made it easier for a strong Pound to push GBP/INR higher, but analysts believe there isn’t much reason for the Indian Rupee to fall much lower either.

GBP/INR Forecast: Fresh Brexit Fears Could Cause Pound to Plunge

As the Indian Rupee trends near its worst levels in over two years versus the Pound and analysts predict the Rupee will not fall much further, the Pound to Indian Rupee exchange rate could be in for losses.

Notable UK data will be published over the coming sessions, with some Indian data coming in towards the end of the week.

Tuesday will see the publication of Britain’s July job market results, including wage growth figures.

Wednesday will follow with India’s July industrial and manufacturing production stats, as well as inflation data from August. WPI inflation data will round the week off on Friday.

Perhaps the most influential news this week though, besides potential developments in Brexit news or trade developments, will be Thursday’s Bank of England (BoE) policy decision.

The bank is not expected to make any changes to monetary policy in this week’s decision, but any shifts in tone the bank makes on Britain’s economic outlook, or any signs that BoE Governor Mark Carney’s term will be extended, could influence the Pound.
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