Pound to Indian Rupee (GBP/INR) Exchange Rate Forecast – GBP/INR Stronger, USD/INR Puts in a Patchy Performance

The Rupee slid against the Pound today following the release of UK employment data, as did the majority of the British currency’s peers.

As the data showed that the UK unemployment rate fell by considerably more than forecast (dropping from 7.4 per cent to 7.1 per cent rather than edging to 7.3 per cent as forecast) Sterling posted widespread gains.

Although minutes from the Bank of England’s latest policy meeting intimated that the central bank will hold interest rates at record lows for the foreseeable future (even if the unemployment rate hits the 7 per cent target) the Pound enjoyed a buoyant relationship with rivals like the Rupee.

The GBP/INR pairing hit a high of 102.6490.

The Rupee also experienced movement as a result of a proposal by the Reserve Bank of India.

The RBI committee has recommended that benchmark interest rates be set by an independent monetary policy committee and has outlined plans to assume a 4 per cent CPI target by 2016. If the proposal is adopted it may usher in a period of elevated interest rates.

According to economist Indranil Pan; ‘It is difficult to see the RBI in a rate-cutting cycle if it really has to move to 6 per cent in the next 24 months. If the RBI starts to adopt these timelines and targets, we should be placed for an extended pause (and probably a few hikes as and when required).’

While the Rupee initially slipped as a result of the recommendations the emerging market asset recovered declines against the US Dollar as foreign banks sold the safe-haven asset.

Gains in local stocks also supported the Rupee and the currency was able to trim initial losses before the release of US MBA mortgage applications data, which showed a 4.7 per cent gain in January following a previous 11.9 per cent advance.

While the UK employment report is likely to give the Pound underlying support in the days ahead, before the end of the week additional GBP/INR movement could occur in response to Indian foreign reserves, deposit growth and bank loan growth data and the UK’s BBA loans for house purchase figures.

USD/INR volatility could be triggered by tomorrow’s US initial jobless claims/continuing claims figures and the US Markit preliminary PMI report.