GBP/INR Exchange Rate Drops 0.4% as Oil Prices Trim Indian Deficit, Pound Pressured

The GBP/INR exchange rate declined on Monday, falling to a low of 97.9610 in response to news that India’s trade deficit narrowed in August.

With oil prices going into freefall over the last few months the shortfall was able to ease from 12.2 billion US Dollars in July to 10.8 billion Dollars.

In the view of currency analyst Anish Vyas; ‘The fall in oil prices is going to be hugely supportive in containing deficits and inflation.’

The Pound Sterling to Indian Rupee exchange rate hit a high of 98.8380

Also today, India’s Consumer Price Inflation was shown to have slowed by more than forecast.

Economists had estimated that consumer prices would be up 7.11% on the year in September, just down from August’s 7.73% figure.

However, CPI actually came in at 6.46%.

Despite this drop, many investors doubt the Reserve Bank of India’s ability to get inflation to 6% by 2016.

As stated by one locally-based economist; ‘Inflation could fall below 6% but subsequently it will rise and by January you will be back to 7%. These numbers are a bit transient’.

The Indian Rupee was also trending in a stronger position against the US Dollar as bets that the Federal Reserve might refrain from increasing interest rates until the global economic outlook improves pushed the ‘Greenback’ lower.

The GBP/INR exchange rate was little affected by the day’s only UK news.

While the Lloyds Employment Confidence index did show improvement, rallying from 6 to 10, the data wasn’t significant enough to bolster the Pound.

Sterling is currently feeling the pressure ahead of two potentially influential UK economic reports – Consumer Price Inflation and Average Weekly Earnings.

GBP/INR Exchange Rate Forecast

Tomorrow volatility in the Pound to Indian Rupee (GBP/INR) exchange rate could be occasioned by India’s Wholesale Price Inflation figures. However, movement is more likely to be driven by the UK’s Consumer Price Index.

It has been forecast that the pace of Consumer Price growth slowed to a five-year low of 1.4% in September, year-on-year – moving further away from the Bank of England’s 2% target.

As lower inflation would give the BoE leeway to leave interests on hold for longer, the Pound could tumble if the data meets the market consensus.

Investors will also be looking ahead to Wednesday’s UK employment stats. Although the UK’s unemployment rate is expected to decline, Sterling could fail to see any benefit if average weekly earnings continue to trend well below the rate of inflation.

Other Indian reports with the potential to impact the GBP/INR pairing this week include the nation’s Trade Balance figures (out on Wednesday) and Deposit Growth/Bank Loan Growth/Foreign Reserves data – scheduled for publication on Friday.