GBP/INR Approaches 3-Month Low; Currently Above 91.900

GBP/INR is declining in early trading on Monday, getting closer to the lowest level since January 13 at around 91.800. If the price breaks this support line, then it might update the lowest level since November last year.

Currently, one British pound buys 91.932 Indian rupees, down 0.30% as of 6:13 AM UTC.

GBP/INR: Pound under pressure amid fears of hard Brexit

UK Prime Minister Boris Johnson hopes for a Canada-style trade deal with the European Union (EU), while European leaders don’t want to compromise the single market standards.

Elsewhere, the rupee might have been driven by a survey that suggests Indian retail inflation likely increased to a six-year high last month. This might be enough to convince the Reserve Bank of India (RBI) to maintain the interest rates at the current levels.

According to the poll conducted by Reuters, more than half of 40 economists believe India’s consumer price inflation is expected to have increased at an annual pace of 7.40% in January, after 7.35% in December. This would be the highest reading since May 2014.

Thus, the central bank might keep its repo rate at 5.15% this Thursday, even though the economic growth is still slowing.

Darren Aw, an economist at Capital Economics, commented:

“Headline consumer price inflation is likely to have edged up in January, in large part due to a continued increase in food inflation. Weekly data indicate that vegetable inflation has peaked, but remains very high. And supply constraints have also caused milk producers to raise prices.”

The RBI might leave the rates unchanged for almost the entire year, putting the burden of responsibility of economic revival on the government’s shoulders. However, the recently approved annual budget doesn’t encourage fiscal expansion.

Samiran Chakraborty, Citi’s chief economist for India, explained:

“Any future rate cut can happen only after CPI comes down to around 5% and transmission of past rate cuts is more complete. This provides only limited room in a world of uncertain inflation.”

The pound has the chance to take its revenge tomorrow when the UK will release GDP data.

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