GBP/INR doesn’t show any signs that it’s ready to give up the bullish rally that took off on November 27. The pair has gained 0.16% as of 6:35 AM UTC, currently trading at 93.845. The price has increased by over 2.10% since the start of the rally.
Yesterday, the Reserve Bank of India (RBI) surprisingly left the interest rates unchanged even though the economy has been struggling for months. However, the rupee tumbled on the central bank’s updated outlook.
Earlier today, the RBI said that the consumer confidence in India declined to the lowest level since 2014, the year when Narendra Modi became Prime Minister.
The current situation index dropped to 85.7 last month, from 89.4 in September. The 100 mark separates pessimism from optimism. The future expectations index, which touches upon the one-year ahead sentiment, declined to 114.5 from 118.0.
The sentiment is worsening amid India’s economic slowdown and increased worries about the labor market. The root cause of the GDP stagnation is the crisis in the shadow-banking sector, whose tightening lending hit domestic consumption.
In the three months to June, Asia’s third-largest economy reported economic growth of 5%, which was the weakest result in six years. The September quarter posted an even worse performance of 4.7% growth.
The RBI’s survey involved 5,334 households in 13 major cities, including New Delhi, Mumbai, and Bengaluru. The respondents were asked about perceptions and expectations on the economy, the labor market, and the overall price situation excluding income and spending. Consumers said that they felt that prices had increased in 2019 and were likely to go even higher next year.
RBI Governor Shaktikanta Das revealed that the Indian government might implement some counter-cyclical policy measures to boost economic growth.
“It is also likely that the government may initiate some more counter-cyclical fiscal and other measures to arrest the slowdown,” Das said after the central bank shocked the markets with its decision to leave the rates unchanged.
Taimur Baig, chief economist at DBS Group Research, commented the bank’s decision:
“I cannot remember the last time there has been such a resounding surprise as far as the RBI decision is concerned. It defies the expectation of the market and also the body language of the central bank over the last six months.”