GBP/INR continues to decline in early trade on Monday. Currently, one British pound buys 92.362 Indian rupees, down 0.05% as of 6:00 AM UTC.
The pound has been under pressure amid Brexit-related tensions between the UK Government led by Prime Minister Boris Johnson and European leaders. After securing a major win in the UK election, Johnson made it illegal for the government to extend the deadline of the Brexit transition period beyond December 2020, leaving only 11 months to negotiate a complex trade deal with the European bloc. Economists fear that the UK might head towards a no-deal Brexit if it fails to reach consensus with the European Union within such a short period. The UK is set to leave the bloc next week.
The sterling is also bearish on the Bank of England’s (BoE) intention to cut the interest rate for the first time since 2016. Several members of the BoE’s Monetary Policy Committee (MPC), including Governor Mark Carney, said that they were ready to cut the rates if the economic weakness persisted.
A series of economic data last week showed that the UK economy wasn’t performing well in December last year. Thus, the BoE is likely to cut the rates at its next meeting later this month.
On Friday, the UK’s Office for National Statistics (ONS) said that retail sales had dropped 0.6% last month compared to November, while economists anticipated a rise of 0.5%. That was a record fifth consecutive month of decline in retail sales indicator. Annual growth in retail sales fell 0.9%, while analysts expected an increase of 2.6%.
Nevertheless, January figures in retail sales, consumer prices, and other economic indicators might show an improvement in the economy as a result of Johnson’s victory, which boosted confidence among businesses and consumers.
Finance minister Sajid Javid plans to double the UK’s underlying rate of economic growth after it leaves the EU. However, he said that the EU would not commit to abiding by European rules in post-Brexit trade negotiations. He told the Financial Times:
“There will not be alignment, we will not be a rule-taker, we will not be in the single market and we will not be in the customs union – and we will do this by the end of the year.”