GBP/INR is bearish on Tuesday, driven by fresh no-deal Brexit fears and positive sentiment on the US-China trade deal. Currently, one British pound buys 94.075 Indian rupees, down 0.47% as of 6:47 AM UTC.
The rupee is backed by positive trade news. Yesterday, US President Donald Trump said that the phase one deal with Beijing was almost complete. He stated during a meeting with governors and lawmakers:
“I said make sure you have the right translators because you can lose a lot with bad translation. So we’re working on getting that done.”
The deal will see the US canceling the new tariffs that were set to take effect on December 15. Besides, Trump will cut tariffs on Chinese imports that have been around since September. On the other side, China agreed to ramp up purchases of US agricultural products and other goods and services. However, many details of the trade deal, such as intellectual property rights changes pledged by China, still remain unclear.
While Trump said that the agreement would be signed within the next few weeks, China’s Foreign Ministry hesitated to provide a timeframe. Spokesman Geng Shuang told media:
“China and the United States still need to finish some necessary procedures.”
He added that Beijing would come up with more details “at the right moment.”
The economy of India depends on trade, which is why the rupee is sensitive to trade-related news, especially when India borders China.
The rupee has extended its gains against the sterling after UK Prime Minister Boris Johnson, whose party won a major victory in the UK election last week, said that the government would introduce an amendment to the Withdrawal Agreement Bill (WAB) that would make any extension to the Brexit transition deadline illegal. Skeptics fear that such a move could open the door to a no-deal Brexit, which might turn out very badly for the economy.
While Brexit is likely to officially take place before January 31, the transition deadline is set for December 31 2020. This timeline can be extended by mutual agreement with European leaders, but Johnson insists for an 11-month process.
