GBP/INR is moving sideways in early trading on Thursday. The pair leapt at the beginning of the week as the UK was presenting its roadmap to ease lockdown measures. The price faced resistance at around 93.300 and has entered a correction phase. Currently, one British pound buys 92.992 Indian rupees, up 0.02% as of 6:20 AM UTC. The pair touched a daily low at 92.830 a few hours ago.
Sterling investors focused on the comments made by Bank of England Governor Andrew Bailey. He said that the British economy might need longer to recover from the corona crisis than initially thought. The central bank released its outlook earlier this month, but Bailey says the bank is more pessimistic now.
He explained in an opinion piece published in The Guardian:
“The risks are undoubtedly on the downside for a longer and harder recovery. […] It is also possible that the pace at which activity recovers will be limited by continued caution among households and businesses even as official social distancing measures are relaxed.”
At the beginning of May, the BoE presented some gloomy figures in its main scenario, anticipation a quarterly GDP contraction of about 25% and the biggest annual decline in over three centuries. Next, the central bank expected a recovery by late 2021. Nevertheless, Bailey explained in its recent opinion post that the recovery scenario depends on how quickly life gets back to normal.
“This depends on how the measures continue to be eased, what degree of natural caution is shown by people, and how much longer-term damage is done to the economy,” the governor said.
More Rating Agencies Expect India’s Economy to Contract by 5% in FY21
In India, more rating agencies are pointing to the largest recession in the country’s history. On Thursday, S&P Global Ratings said that India’s economy would contract by 5% in the current fiscal year, citing the lockdown measures as the main factor that hit the economic activity.
“We have lowered our growth forecast for the fiscal year ending March 2021 to a 5 per cent contraction. We currently assume that the outbreak peaks by the third quarter,” S&P said.
Previously, Crisil and Fitch presented similar figures.
