The Pound tumbled against the Indian Rupee yesterday as investors continued to worrying about growth in the UK economy despite a slight uptick in the latest GDP report.
Growth was revised up from 0.6% to 0.7% in the fourth quarter as the UK’s economy remained relatively resilient despite the vote for Brexit.
However there were a few underlining factors that created cause for concern in financial markets, such as slowing consumer spending.
As John Hawksworth, chief economist at PwC explained;
‘Consumer spending growth also remained solid in the fourth quarter as a whole, although the latest retail sales figures suggest that this has shown signs of tailing off in December and January.’
Fears over Brexit also appear to have impacted business investment in the UK, falling by 1% in the last quarter of 2016 as the uncertainty of Britain’s exit from the EU prompted companies to hold off from making any major commitments to the UK.
Meanwhile, the political uncertainty that has overshadowed the majors in recent weeks is making emerging currencies such as the Indian Rupee more attractive to investors, allowing INR to exploit the weakness in Sterling.
Traders are seeking alternative markets to invest in as the uncertainty of Donald Trump’s economic policies and the rise of European populism prompts traders to shy away from some of the world’s largest economies.
The Rupee’s rise was also supported by upbeat forecasts from HSBC’s Asian FX Strategist, Alastair Pinder who predicts that INR should perform well in 2017 thanks to a hawkish Reserve Bank of India and positive reforms by the government.
Pinder also forecasts that India will emerge relatively unscathed from a potential trade war with Trump as its economy is not as reliant on the US as some of its neighbours.
Looking ahead, GBP INR is likely to continue being undermined by Brexit over the coming month as Prime Minister Theresa May plans to formally begin Britain’s exit from the EU by the end of March, with the government set to pursue a ‘hard Brexit’ that will see the UK lose access to the single market.
Whether the Indian Rupee is able to take full advantage is yet to be seen however as the economy still recovers from Prime Minister Narendra Modi’s shock decision to demonetise over 80% of the nation’s cash at the end of 2016.
Current Interbank Exchange Rates
At the time of writing the GBP INR exchange rate was trending around 83.30 and the INR GBP exchange rate was trending around 0.01.
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