GBP/INR is enjoying its first bullish day of this year on Friday. Currently, the pair is trading at 94.041, up 0.30% as of 6:05 AM UTC.
Despite benefiting from better-than-expected Indian manufacturing data, the rupee is under pressure amid re-escalating geopolitical tensions in the Middle East, after the US launched an airstrike in Iraq earlier today.
The news boosted oil prices, with both Brent and WTI crude brands showing gains of about 3% at the time of writing. The rupee is under increased pressure because the Indian economy wouldn’t welcome tensions in the Middle East and also because more expensive oil negatively impacts Indian importers.
The British pound acts more as a safe-haven asset in this case, especially when the UK is leaving the European bloc and is going its own way.
The UK is about to exit the European Union on January 31. However, there is another important deadline for the Brexit transition period, currently set for the end of December 2020. The withdrawal process is now in the hands of UK Prime Minister Boris Johnson, who unexpectedly won a large majority in the election last month. Johnson is quite determined to “get Brexit done” as fast as possible. He ruled out any attempt to extend the deadline for the transition period – a move that might lead to a no-deal Brexit.
The opposition Labour Party wants to reverse Johnson’s amendment to the Withdrawal Agreement Bill (WAB). When the WAB returns to the House of Commons, Labours will call for a two-year extension to the transition period. However, it is unlikely that they will succeed given the Conservatives’ dominance.