GBP/INR returned back to its bearishness on Thursday, after rallying for four sessions in a row. Currently, the pair is trading at 88.984, down 1.90% as of 5:40 AM UTC.
Both the UK and India have implemented tight lockdown measures to curb the spread of the new coronavirus. However, Britain reports more daily cases. Yesterday, the UK government said that the death toll had increased to 463, up from 422 on Tuesday. The number of COVID cases rose to 9,529 from 8,077.
The government led by Prime Minister Boris Johnson is expecting the disease to peak in the coming weeks and has asked manufacturing to supply the National Health Service with the necessary equipment. Currently, the country has up to 8,000 ventilators, which wouldn’t be enough if the virus spreads as predicted.
At the beginning of the week, Johnson ordered citizens to stay at home.
BoE, UK Government Ready to Boost Stimulus
The Bank of England (BoE) and the finance ministry will resume their collaboration today to support the economy and avoid a prolonged and severe recession. The central bank increased its bond-buying programme by another 9% of British GDP and has implemented a series of other measures to stimulate lending.
Governor Andrew Bailey, who recently replaced Mark Carney, hinted that the BoE wouldn’t reduce the interest rate from its record low of 0.1%. Instead, the central bank will focus on its quantitative easing (QE) programme.
Central banks are closely monitoring the US Federal Reserve, which recently surprised markets when it announced its unlimited QE potential.
JPMorgan economist Allan Monks said in a note to clients yesterday:
“Our guess is… that no further purchases will be announced tomorrow. But we think the BoE will end up announcing additional asset purchases by the May meeting, especially if it becomes clear that the fiscal deficit is likely to exceed 10% of GDP as we suspect.”
The pound’s plunge might be temporary since the Indian economy is facing even harsher conditions due to the lockdown measures implemented at the start of the week. ING Groep and Deutsche Bank said that the economy was expected to tumble next quarter while the annual growth is about to slow down.