GBP/INR continues to trade within the sideways channel that started to form at the end of March. Currently, one British pound buys 93.965 Indian rupees, up 0.25% as of 6:20 AM UTC. Last Thursday, the pair broke below 93.000 for the first time since April 7, though it has bounced back since then. The price is likely to find some resistance near 94.000.
Both the British and Indian economies are devastated by the COVID pandemic and the lockdown measures that came with it.
Last month, market analysts argued that India would be among only a few countries whose economy would experience growth. However, today, many economists admit that contraction is unavoidable.
On Friday, Japanese brokerage Nomura and US banking giant Goldman Sachs predicted that India’s gross domestic product (GDP) would contract 0.4% in the current fiscal year. Earlier that day, Moody’s reduced GDP growth estimate to zero.
Nomura said:
“We expect real GDP growth to fall to -0.5 per cent y-o-y in 2020 (vs 5.3 per cent in 2019) and by -0.4 per cent in FY21 (vs. 4.6 per cent expected in FY20).”
Goldman Sachs also anticipates the economy to contract by 0.4%. Nevertheless, the brokerage has upgraded the expectations of recovery in the second half of the fiscal year.
Goldman Sachs said that the Reserve Bank of India would likely cut the interest rates again to handle the crisis, especially when slipping inflation allows doing that.
Elsewhere, Moody’s warned of India’s high fiscal deficit and government debt as the main negative factors contributing to the higher credit risks.
UK Gradually Eases Lockdown Measures
The UK isn’t doing any better, as most analysts predict the worst recession in about three centuries. Prime Minister Boris Johnson said yesterday that lockdown measures would continue at least for a while, though the government would begin gradually easing some rules. The PM stated:
“This is not the time simply to end the lockdown this week. Instead we are taking the first careful steps to modify our measures.”
Starting from today, those who cannot work from home might go to work. Also, everyone is allowed to do outdoor exercise from Wednesday, though social distancing guidelines should not be ignored.
