GBP/INR has just touched the highest level since February 3 during its fourth consecutive bullish session. The pair is now trading at 93.178, up 0.15% as of 6:40 AM UTC.
INR struggling amid stagnation fears
The rupee is still down, as the inflation is increasing too fast while the economy doesn’t show signs of revival.
Earlier today, India’s commerce and industry ministry released wholesale inflation data, with the figures beating analysts’ expectations again. Wholesale inflation accelerated last month to 3.1%, driven by an increase in fuel and power prices. The cost of manufacture products also went up. In December, wholesale price inflation was 2.59%.
Inflation in fuel and power was 3.42% in January, after a decline of 1.46% in December 2019. The rate of manufactured products, which account for 64.23% of the index weight, was 0.34% last month from a negative 0.25% in December.
The inflation in food products slowed to 11.5% last month from 13.24% in December, with onion declining to 293.3% from 455.8%. However, inflation in potato accelerated to 87.8% in January from 45% in December.
Yesterday, we reported that India’s retail inflation surged to 7.59% in January, to the highest level in six years. This leaves less room for the Reserve Bank of India (RBI) to cut the interest rates and support the economy. The government has to consider alternative measures to trigger the revival.
GBP still strong after Javid’s resignation
The sterling’s rally would likely have been more pronounced, but the British currency is facing resistance after finance minister Sajid Javid left his role as a result of a dramatic debate with Prime Minister Boris Johnson. Investors now fear that the political shock might negatively influence the UK’s Brexit implementation, which should be carried out until the end of this year.
The two leaders of the British government had a face-to-face row, after which Javid decided to resign. The PM required the Chancellor of the Exchequer to fire all his most senior aides as part of a move to set up a new economic unit that would merge with the PM’s office.
Javid is replaced by Rishi Sunak, who is currently chief secretary to the Treasury.