The rupee is stronger at the start of the week, even though India’s economic bleeding is getting worse. GBP/INR has declined in early trading on Monday by 0.39% to 94.288, as of 6:00 AM UTC. Larger timeframes show that the pair has moved sideways since the end of March.
The recent decline in price has to do with investors’ behavior. At the end of last week, the pair has been bullish but couldn’t break above a strong resistance level near 95.000. Now the price is moving towards a reliable support level near 93.500.
The fundamentals are not favoring the rupee though. Earlier Monday, Nikkei and IHS Markit released India’s manufacturing data for April, which showed that activity tumbled at the fastest pace on record as a result of the nationwide lockdown.
India’s Nikkei manufacturing purchasing managers’ index (PMI) crashed to 27.4 in April from 51.8 in March. This is the lowest reading since the survey came out in 2005.
Eliot Kerr, an economist at IHS Markit, commented:
“After making it through March relatively unscathed, the Indian manufacturing sector felt the full force of the coronavirus pandemic in April. Record contractions in output, new orders and employment pointed to a severe deterioration in demand conditions.”
New orders and output showed the biggest decline on record, forcing manufacturers to cut jobs at the fastest rate.
Last month, a Reuters survey suggested that India’s economy might enter a recession for the first time since mid-1990s. The government’s support package worth $22.4 billion and the central bank’s rate cuts cannot offset the economic decline.
UK Launches Loan Scheme to Help Small Businesses
Elsewhere, the UK is also struggling with the impact of the pandemic. The government led by Prime Minister Boris Johnson implemented the lockdown measures at the end of March. The PM doesn’t seem to endorse a quick reopening of the economy, which might cause further damage especially among small and medium-sized businesses.
Today, finance minister Rishi Sunak announced the launch of a government-backed loan facility to support small businesses. Thus, firms operating coffee shops, hairdressing salons or florists might obtain emergency cash. The minister said:
“Small businesses will play a key role creating jobs and securing economic growth as we recover from the coronavirus pandemic.”
