GBP/INR is Moving Higher as Brexit Worries Ease on Boxing Day

GBP/INR is moving upwards in early trading on Thursday. Currently, the pair is trading at 92.561, up 0.23% as of 7:50 AM UTC. The pound has strengthened against rupee since late Monday. Prior to that, the pair saw one of the worst weekly performances in months.

The sterling has been under pressure since UK Prime Minister Boris Johnson voiced his plans to rule out any attempt to extend the Brexit transition period beyond December 2020. The Conservative-led Parliament voted the amended Withdrawal Agreement Bill (WAB) last Friday. Investors are worried that the tight timeline for reaching a trade deal with the European Union (EU) could lead to a no-deal Brexit, which is a worst-case scenario for the British economy.

Nevertheless, Christmas holidays alleviated those fears, allowing the pound to take a pause from the bearish mood. The British currency is now increasing for the third consecutive day against the rupee. The UK markets are closed on Boxing Day.

The rupee would have gained more when the pound crashed against majors, but the Indian currency has been dragged down by the economic slowdown, as Asia’s third-largest economy cannot revive after multiple efforts from both the government and the Reserve Bank of India (RBI).

India’s Finance Ministry is now reviewing several proposals for the next year’s budget. On the one hand, some of the proposals are a flat tax rate without exemption, cuts in personal income tax, and new slabs for high-income earners. Other suggestions refer to spending more on infrastructure instead of focusing on tax reliefs.

The finance ministry will present arguments for and against these proposals before the government takes a decision at the highest level. The budget will be presented in February. A government official told the press:

“All options are being examined… Any such move needs to be examined in the context of gains it can bring to the overall economy vis-a-vis the cost it entails.”

Many government officials would give up tax cuts to spend more on infrastructure. A senior government officer commented on the tax reliefs:

“It may not be a sufficient amount for people to spend and those with higher income levels will actually end up pocketing the benefit, without any significant increase in consumption.”

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