GBP/INR continues to edge higher this week after reversing a downtrend and securing a 0.71% gain on Monday. At the time of writing, one British pound buys 97.895 Indian rupees, up 0.33% as of 7:30 AM UTC. There are no major fundamentals to look into right now. The pound is gaining traction despite the pessimism over the trade talks between the UK and the European Union.
The British economy is recovering after the government led by Prime Minister Boris Johnson lifted the strict social distancing measures. At the end of last week, the Office for National Statistics released retail sales data for July that beat analysts’ forecasts.
Indian Economy Set to Recover, but High Inflation Hinders RBI’s Monetary Easing
Elsewhere, the Indian economy is set to experience quick recovery as well. Moody’s Investors Service said earlier today that India, China, and Indonesia would be the only G20 emerging economies to see a recovery of real GDP in the second half of 2020. It maintained its forecast of 3.1% contraction for India for the entire year. The rating agency stated:
“The economic outlook of emerging market countries is more challenging than in advanced economies. In our baseline projections, China, India and Indonesia will be the only G-20 emerging economies to post a strong enough pick up of real GDP in the second half of 2020 and full-year 2021 to end next year above pre-coronavirus levels.”
However, much depends on whether the pandemic is addressed properly, especially when many experts warn of a second wave. India continues to report an increasing number of new coronavirus cases. Still, this might be the result of boosting the number of tests.
Another problem for India might be the central bank’s reticence to further ease the monetary policy amid fears of increasing inflation. The Reserve Bank of India (RBI) said earlier today that the country’s headline inflation would go up in the coming months mainly because of disruptions in food and manufactured products’ supply chains. The bank said:
“Disruptions in food and manufactured items’ supply chains could amplify sectoral price pressures, thus posing an upside risk to headline inflation. Heightened volatility in financial markets could also have a bearing on inflation.”
