GBP/INR is declining in early trading on Thursday. The pair is currently trading at 94.293, down 0.11% as of 6:00 AM UTC.
On the first day of the year, the sterling entered a correction phase after rallying since December 23. Nevertheless, the pair has managed to recover about 85% of the losses caused by the post-election bearish trend.
The rupee forces the pair to test support levels after India released strong manufacturing data. India’s manufacturing sector expanded in December at the fastest pace in ten months, driven by robust growth in factory orders.
IHS Markit said that India’s manufacturing purchasing managers’ index (PMI) increased to 52.7 in December, from 51.2 in November. Analysts expected contraction to 51.0. A reading above the 50-mark suggests expansion.
The index was pushed by consumer goods, while capital goods remained below 50.0. Pollyanna de Lima, Principal Economist at IHS Markit, commented:
“Factories benefited from a rebound in demand, and responded by scaling up production to the greatest extent since May. There were also renewed increases in input purchasing and employment during December.”
The better-than-expected performance is like a breath of fresh air for the rupee, which was hit amid India’s struggling economy. Despite the December result, the manufacturing PMI’s average figure for the third quarter of the fiscal year 2019/2020 was the lowest since the three months to September 2017.
On January 7, India will release the first preliminary estimates for economic growth for 2019/2020. Asia’s third-largest economy saw its economy expanding at a modest rate of 4.5% in the July-September quarter, which was the slowest growth in more than six years.
IHS Markit’s survey showed that manufacturers started to hire more in December amid improving underlying demand. Employment in the industry showed the largest growth since February.
Despite a solid performance in operating conditions last month, Indian companies were not so confident about the 2020 outlook. Production is anticipated to expand in the coming 12 months on average, but optimism fell to a 34-month low.
The UK is expected to release its December manufacturing PMI later today.
