GBP/INR is declining in early trading on Monday, after gaining over 1.7% at the end of last week. Currently, one British pound buys 94.199 Indian rupees, down 0.23% as of 5:50 AM UTC. The pair is undergoing a correction after surging last Friday as the UK was officially leaving the European Union.
The price started to decline on fears of a hard Brexit. Last month, UK Prime Minister Boris Johnson had ruled out any attempt to extend the so-called Brexit transition period beyond December 2020, which leaves the two sides only 11 months to reach a complex trade agreement. On the other side, European leaders have asked for at least two years. If Britain doesn’t manage to get a deal with the bloc, the economy will suffer from negative consequences, economists claim.
EU officials said on several occasions that the UK had to abide by the rules if it plans to benefit from the single market. However, Johnson will say in a speech later today that there is no need for the UK to follow the bloc’s rules. Instead, the PM will support a Canada-style free trade agreement and will threaten to end negotiations if such a deal cannot be reached.
“There is no need for a free trade agreement to involve accepting EU rules,” Johnson will say.
However, the Irish PM and European officials have a different opinion, calling the UK to agree to a level playing field. European Commission President Ursula von der Leyen admitted that negotiations would be “hard and fair fast.”
Elsewhere, the Indian rupee is supported by strong manufacturing data at home. IHS Markit said earlier today that the country’s manufacturing purchasing managers’ index (PMI) increased to 55.3 this month from 52.7 in December, which is the fastest pace in about eight years. The indicator has been above the 50 mark, which separates growth from contraction, for 30 months.
Pollyanna De Lima, principal economist at IHS Markit, commented:
“The PMI results show that a notable rebound in demand boosted growth of sales, input buying, production and employment as firms focused on rebuilding their inventories and expanding their capacities in anticipation of further increases in new business.”
