GBP/INR is slightly bullish on Tuesday, trying to reverse a downtrend that has been around since December 5. The pair is currently trading at 93.364, up 0.13% as of 6:13 AM UTC. Most of the gains came in the last few minutes.
The pound is waiting for a series of important UK economic updates. These include the GDP growth in the third quarter, manufacturing production, industrial production, trade balance, and construction output.
Also, the pair might become more volatile as we’re approaching the UK national election due on Thursday. According to recent polls published in the weekend, the Conservative Party led by Prime Minister Boris Johnson has extended its lead against the opposition Labour Party.
The rupee showed some resilience against the British pound after China published its inflation data. The country’s National Bureau of Statistics said that consumer prices (CPI) had demonstrated the biggest surge in eight years. Producer prices (PPI) extended their decline.
The CPI index rose 4.5% in November compared to the same period in 2018, after a 3.8% increase in October. Analysts surveyed by Bloomberg expected a 4.3% rise. The CPI was driven by pork prices, which jumped 110% year-on-year. The increase in pork prices is caused by the African swine fever, which continued to take a toll on the pig population.
Core inflation, which excludes food and energy prices, rose only 1.4% in November, pointing to sluggish domestic demand.
The rupee is also closely monitoring any developments related to the US-China trade relationship. The US is set to add new tariffs of Chinese goods on December 15, though some economists believe this won’t happen. At the moment, US trade negotiators postponed the talks with China to focus on a trade agreement with Mexico and Canada.
US Trade Representative Robert Lighthizer should fly to Mexico today to finalize the so-called USMCA deal. Thus, it is unlikely that we will see the phase one deal between the US and China signed this week.
Shi Yinhong, an adviser to the Chinese government, commented:
“A deal that is implementable must be concrete and detailed, which I don’t think can be concluded within days of December 15. China is unlikely to give a specific commitment on how much US agricultural products it would buy.”
However, sources familiar with the matter said that the planned tariffs might not come into force. Clete Willems, former deputy director of the US National Economic Council, said:
“I don’t expect a final deal by the 15th. There are still difficult things to work out and Lighthizer is focused on the USMCA end game at the moment. That said, I’m not betting on tariffs either.”