GBP/INR started the month with a u-turn that slashed almost half of gains from an uptrend that began on October 28. Last Friday, representative of China and the US hinted that an interim trade agreement is just around the corner, increasing investors’ appetite for riskier trades. Now the rupee looks much stronger against the British counterpart, despite India’s troubling economy.
The pair has lost 0.24% in early trading on Monday, to 91.411 as of 06.30 AM UTC. The price took a breath yesterday when the pound seemed to resume the latest uptrend, but it seems now that it was only a temporary move.
Trump-Xi Trade Agreement is Close
The Indian rupee is benefiting from general optimism on the US-China trade deal. The deal is about to be signed between US President Donald Trump and Chinese counterpart Xi Jinping. The agreement might appease a trade conflict that has been around for about 16 months. INR is getting stronger as foreign investors buy more in Indian equities and debt market.
In the last three sessions, foreign investors have purchased a combined $2.1 billion in Indian equities and bond markets. At the time of writing, stock index BSE Sensex has gained 0.28%.
Indian Economy Continues to Struggle
After the euphoria around US-China trade deal ceases, the rupee will continue to be under massive pressure as the Indian economy shows serious signs of recession. The government and the Reserve Bank of India (RBI) have implemented some stimulus measures, but it remains to be seen if they have effect.
On Friday, the Centre for Monitoring Indian Economy (CMIE) said that the country’s unemployment rate rose to 8.5% in October, up from 7.2% in September. This is the highest figure since August 2016, which demonstrates a difficult situation in the labour market that suffers from the economic slowdown.
Previously, the government said that infrastructure output (ININFR=ECI) tumbled in September by 5.2% compared to the same period in 2018. In the period between April and September, the indicator rose 1.3%. The latest decline represents the worst performance in 14 years.
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