GBP/INR continues to decline on Tuesday as bulls still can’t find an opportune moment to bet on the sterling. At the time of writing, one British pound buys 92.713 Indian rupees, down 0.13% as of 6:20 AM UTC. Yesterday, the pair touched the lowest level since May 27 at 92.515.
The price will likely continue to flash red after the UK’s Office for National Statistics (ONS) released GDP data for the first quarter. It confirmed the worst contraction since 1979.
The ONS said that Britain’s economy had contracted by 2.2% in the first three months. The early estimate anticipated a decline of 2.0%, which already suggested the worst quarterly contraction since the financial crisis in 2008. The indicator reflects the economic performance in January and February when the coronavirus pandemic wasn’t even an issue for the UK. The statistics agency said:
“This is the joint-third largest quarterly contraction in GDP and reflects the imposing of public health restrictions and voluntary social distancing put in place in response to the coronavirus (COVID-19) pandemic.”
The services sector tumbled by a record 2.3% in the three months to March, dragged down by accommodation and food services. Manufacturing and construction also turned negative.
Consumer spending declined by 2.9% or 9.5 billion pounds, which is the largest quarterly drop since 1979.
The ONS explained that the damage was caused by the COVID-19 pandemic. The outbreak forced the UK government led by Prime Minister Boris Johnson impose strict social distancing rules in mid-March. The country went into full lockdown, closing all non-essential businesses. The ONS said:
“These measures have impacted upon the spending behaviours of consumers as well as how businesses and their employees operate.”
UK’s Account Deficit Widens More than Expected
Separately, the ONS reported that Britain’s current account deficit widened in the first quarter, as the balance of payment deficit increase to 21.1 billion pounds. Analysts polled by Reuters expected an average figure at 15.4 billion.
Early data points to a more dramatic contraction in the second quarter, which comprises April’s full month of lockdown.
PM Boris Johnson is about to present his plans to support the economy later today. He will pledge 5 billion that will go to infrastructure investment.