GBP/INR bounces back on Thursday, after several days of a sharp decline. At the time of writing, the pair is trading at 93.186, up 0.39% as of 6:45 AM UTC. The greatest part of the gain came in the last few minutes.
The pound has been weakening these days on fresh worries about a potential no-deal Brexit, as UK Prime Minister Boris Johnson intends to rule out any attempt to extend the deadline of the exit transition. Currently, the deadline is set for December 31, 2020.
The British currency recently hit a strong support level at 92.6800 and bounced back on economist expectations that the Bank of England (BoE) will leave the interest rate unchanged at its meeting later today. The central bank will likely raise the economic outlook after Johnson’s Conservative Party secured a historic win in the election, allowing it to form a majority government.
All 69 economists surveyed by Reuters expect the BoE to maintain the rate at 0.75%. Most of them said that BoE’s Monetary Policy Committee (MPC) would repeat the previous vote of 7-2 in favor of a steady rate. Last month, two MPC members voted for a rate cut, citing the weakening labor market.
Investors will watch the BoE’s meeting minutes to understand the central bank’s plans for 2020. As of today, all possible scenarios are possible.
ING economist James Smith commented:
“It’s pretty murky. Things could be very uncertain in the second half of 2020.”
Allan Monks, an economist at JP Morgan, said that much depends on Brexit:
“As plenty of Brexit uncertainty still surrounds the 2020 outlook, we think the BoE is likely to retain its dovish bias into next year. Even if it holds rates, as we currently expect, the government’s intention to legislate against a transition extension serves to highlight the risk of a cliff edge in 2021.”
Another important question is who will succeed BoE Governor Mark Carney after his departure on January 31, 2020, which happens to be the date when the UK will most likely officially exit the European bloc.
