GBP/INR Keeping an Eye on UK Election, US-China Trade Talks

GBP/INR is moving upwards in early trading on Thursday. The pair is now trading at 93.470, up 0.21% as of 6:20 AM UTC.

Investors are closely watching the UK election, which takes place today. The two largest parties to get the majority of votes are the ruling Conservative Party, led by Prime Minister Boris Johnson, and the opposition Labour Party, led by Jeremy Corbyn. Johnson promises to “get Brexit done” by January 31, which is the latest deadline agreed with European leaders. On the other side, Labours want to hold another referendum that could reverse the Brexit process and leave the UK in the European bloc.

On Tuesday, a YouGov poll showed that Johnson’s lead was narrowing a lot, increasing the risk for a hung parliament with no majority. The pound tumbled against the rupee after the survey was published. Nevertheless, the pair has recovered the losses since then.

While the sterling is under pressure, the rupee is performing even worse amid ongoing worries about Indian economic slowdown and the uncertainty around the US-China trade deal.

Yesterday, the Asian Development Bank (ADB) cut its outlook from India’s gross domestic product (GDP) growth to 5.1% for the fiscal year 2019, down from 6.5%. The banks also slashed its forecast for the fiscal year 2020 to 6.5%, down from 7.2%. The outlook is part of the bank’s Asian Development Outlook 2019 Update.

The rupee is greatly affected by the pessimism over the Sino-US trade relationship, as the US is set to impose new tariffs on Chinese goods on December 15, which might have a negative impact on negotiations for a phase one trade deal.

People familiar with the matter told Reuters that US President Donald Trump should meet with top trade advisers later today to discuss the planned tariffs on $160 billion in Chinese goods. The President will meet with Trade Representative Robert Lighthizer, Treasury Secretary Steven Mnuchin, and White House advisers Larry Kudlow and Peter Navarro.

While the trade advisers are expected to voice contradictory opinions, the final decision whether to give up the tariffs or impose them as planned will be up to Trump.

One source said:

“I’m expecting them to raise the tariffs on Sunday. The administration is preparing its talking points about how that’s the right thing to do. The message is that it will not be painful.”


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