Pound to Indian Rupee (GBP/INR) Exchange Rate News – Rupee Rallies Following Services PMI

Speculation that the recent weakness in emerging market assets has been excessive saw higher-risk currencies like the Rupee gain overnight.

As observed by foreign exchange strategist Charles St-Arnaud; ‘You’ve had a pattern of increased risk aversion, but that came off today […] At some point, people were going to be willing to get long emerging markets again’.

While the Rupee trimmed initial gains against the US Dollar as local trading progressed, the currency was enjoying a stronger relationship with the Pound.

The Rupee was also supported by the news that the pace of contraction in India’s services sector slowed in January.

Although services PMI fell for a seventh month, the measure of private sector output advanced from 48.1 in December to 49.6 in January, taking the measure closer to the 50 mark separating growth from contraction.

The report also detailed the strongest level of confidence among services firms for six months, with services providers hiring additional workers as the year began.

Although the rate of new business declined, there are expectations that new orders will increase in the months ahead.

However, despite the more reassuring top line figure, HSBC economist Leif Eskesen painted a rather pessimistic picture of the results; ‘Service sector activity remains weak and broad based […] Meanwhile inflation pressures firmed, with input prices rising at a faster pace. Despite the weak growth backdrop, the RBA has to stick to its hawkish bias to get inflation under control and through this eventually pave the way for a recovery in economic activity.’

Other Indian reports to look out for this week include Friday’s foreign reserves and bank loan growth figures.

Meanwhile, news that growth in the UK services sector unexpectedly slowed in January weighed on the Pound and pushed the currency lower against several of its rivals.

The index of non-manufacturing activity eased from 58.8 at the close of 2013 to 58.3. Economists had forecast a reading of 59.
Tomorrow’s Bank of England rate decision and policy announcement could have an impact on the GBP/INR pairing.

If the central bank maintains that interest rates will be held at record lows for the foreseeable future the Pound could come under pressure.