GBP/INR opens the week with a decline, but the pair hasn’t been trending since the start of February. Currently, the pair is trading at 92.695, down as of 6:10 AM UTC.
The pound couldn’t leverage the weakness in the Indian rupee
The pound couldn’t leverage the weakness in the Indian rupee, which is itself struggling after the government announced on Friday that the economy had grown by 4.7% in the three months to December, which is the slowest rate in about seven years. Economists expect that the coronavirus epidemic would delay a potential recovery.
DK Pant, chief economist at India Ratings and Research, commented:
“Despite 3Q generally being one of the strongest quarters due to the festival season and higher rural spending driven by kharif harvest, the growth slowdown is continuing.”
Earlier today, IHS Markit released India’s manufacturing activity growth figures, which slowed from January’s eight-year high. Nikkei India manufacturing purchasing managers’ index (PMI) declined to 54.5 in February from 55.3 in January.
IHS Markit’s principal economist Pollyanna De Lima commented:
“Factories in India continued to benefit from strong order flows in February, from both the domestic and international markets.”
Pound
The sterling can’t deal with the pressure amid the start of the trade talks between the UK and the European Union (EU). The negotiations formally begin today in Brussels. However, people familiar with the matter told Bloomberg that the tensions would put a potential agreement in danger as early as in April.
European officials are worried about UK Prime Minister Boris Johnson’s lack of attitude regarding the Irish border, after he promised to implement checks for the goods traded between mainland Britain and Ireland. The EU has made it clear that if Johnson fails to keep his promise, the bloc won’t sign any trade deal.
If the UK ends up without any deal by the end of this year, it will leave the single market and customs union, which will have severe repercussions on the British economy.
Besides the trade talk difficulties, the sterling has been under pressure amid the coronavirus outbreak. The UK noted a jump in new cases on Sunday, with 12 new infections being confirmed, bringing the total number to 35. UK health minister Matt Hancock anticipates that the global epidemic would get worse. He said:
“We’ve got a clear strategy for dealing with coronavirus – a very, very significant challenge. We’re also planning in case this gets worse, much worse.”
