GBP/INR is slightly declining in early trading on Monday, but the pair is still trading inside a steep bullish channel that started on February 10. The price is currently fluctuating close to the support line, so we might see a trend reversal if it breaks it below that line in the following hours.
INR supported by China’s decision to easy its monetary policy
The Indian currency is supported by China’s decision to ease its monetary policy in an attempt to boost its economy hit by the coronavirus outbreak, though that was a widely expected move. The People’s Bank of China (PBOC) cut the interest rate on its medium-term lending earlier today. The central bank lowered the interest rate on 200 billion yuan worth of one-year medium-term lending facility (MLF) loans to banks from 3.25% to 3.15%. Now investors anticipate that the central bank will also cut the benchmark loan prime rate (LPR) this Thursday.
The death toll of the coronavirus has already exceeded the 1,700 mark, with over 70,000 being infected. On Monday, China reported 2,048 new cases.
Talks about China’s subdued economic growth doesn’t bode well for India, which an important trade partner.
Analysts polled by Reuters anticipate that China’s economic growth in the first quarter could slow to 4.5% from 6.0% in the previous quarter.
Elsewhere, the sterling has been under pressure after UK finance minister resigned and amid post-Brexit challenges. Recently, France warned the UK to be ready for a tough battle with the European bloc during the negotiations for a trade deal. French foreign minister Jean-Yves Le Drian said that the two sides would “rip each other apart.” Moreover, he added that Britain might find it difficult to achieve its goal of signing a free trade deal by the end of December. This possibility worries British markets, which seek to avoid a hard Brexit scenario at all costs.
On Sunday, Le Drian gave a speech at a security conference in Munich, Germany, saying:
“I think that on trade issues and the mechanism for future relations, which we are going to start on, we are going to rip each other apart. But that is part of negotiations, everyone will defend their own interests.”