GBP/INR continues to decline on Wednesday, tumbling about 1% since late Monday. The rupee might be driven by investors’ appetite for riskier assets amid renewed optimism over the Sino-US trade deal.
Currently, one British pound buys 91.657, down 0.30% as of 7:02. The pair tumbled 0.59% on Tuesday.
The sterling is losing ground as investors have already squeezed everything out of the Brexit optimism.
Nevertheless, the rupee can make a u-turn on Friday, after India releases its gross domestic product (GDP) data for the three months to September.
Most analysts and rating agencies agree that the Indian economy might have slowed to below 5%, showing a decline for the sixth quarter in a row, which will be a first since 2012.
India Ratings and Research, a subsidiary of Fitch Group, said yesterday that it expected the GDP to have slowed to 4.7% in the July-September quarter. India expanded only by 5% in the three months to June, which was the slowest pace since 2013.
The rating agency also lowered its GDP forecast in annual terms:
“India Ratings and Research has revised its GDP growth forecast for FY20 to 5.6 per cent. This is the fourth revision and has come in after the agency had revised its FY20 GDP growth forecast only a month ago to 6.1 per cent.”
India cannot revive its economy despite a series of implemented fiscal stimulus, including cuts in corporate tax rates.
The Fitch subsidiary stressed that the revision couldn’t be avoided because “the high-frequency data now suggests that the agency’s estimate of 2QFY20 GDP growth coming in a little higher than 5 per cent is unlikely to hold.”
A recent Reuters poll concluded that the Reserve Bank of India would cut its interest rate at the December meeting for the sixth time this year, and would decide for another cut before July. However, economists expect no major impact whatsoever.
Despite all the bearish signals, the rupee is enjoying the moment amid increased hopes for a US-China trade deal. Yesterday, US President Donald Trump said that the countries were very close to reaching an agreement. The currency is benefiting from an inflow of funds coming from investors who bet on Indian equities.