GBP/INR has extended the decline after two bearish sessions. Currently, one British pound buys 93.547 Indian rupees, down 0.50% as of 6:35 AM UTC. The pair will face a strong resistance near 93.000 and might update the lowest level since the end of March if it breaks below it.
The pound turned bearish after UK Prime Minister Boris Johnson made it clear that the government wouldn’t lift the lockdown restrictions anytime soon. The PM, whose fiancée gave birth to a baby boy, returned to work last Monday and has become tougher on the coronavirus.
England’s deputy chief medical officer, Jonathan Van-Tam, said yesterday that the government would think very carefully about easing the social distancing rules related to outdoor activities. He said:
“At various different points (the activities) might involve a congregation of individuals and one has to be very painstaking and very careful about thinking through some of these before we make the wrong move to relax measures.”
He stressed that the virus would come back, which is why the government should be “extremely sure-footed.”
While these measures might help the UK curb the spread of the virus, some economists point to the catastrophic consequences of extending the lockdown.
Besides the pandemic, investors are also concerned about the trade negotiations between the UK and the European Union. UK foreign minister Dominic Raab said yesterday that the two should reach a deal by the end of December to end uncertainties. He told parliament:
“Let’s be very clear about it, our position is unchanged. The transition period ends on the 31st of December, that is enshrined in law.”
Moody’s, Fitch Might Downgrade India’s Rating
Elsewhere, the Indian economy is under increased pressure as well. Nomura said that Moody’s and Fitch are about to downgrade India. Moody’s can lower outlook to Baa3 ‘stable’ from Baa2 ‘negative’, matching the rates of Fitch and S&P. The two rate India at BBB-. Fitch can even downgrade India to negative amid deteriorating debt conditions. Nomura explained in its research note:
“India’s Achilles heel on ratings remains its parlous state of fiscal affairs. A potential spike in its general government debt from around 70% of GDP to around 75-80% of GDP may possibly trigger a reassessment of ratings, particularly for Moody’s.”
