GBP/INR updated the weekly high as it continues to rally for the third session in a row. Currently, one British pound buys 94.298 Indian rupees, up 0.18% as of 6:10 AM UTC. Yesterday, the pair gained 0.52%, after a 0.88% surge on Tuesday. The price is now testing a strong resistance level and may continue to rally, aiming for 95.000.
The uptrend jump-started as UK Prime Minister Boris Johnson announced on Tuesday his “new deal,” which revolves around investing 5 billion pounds in infrastructure and building homes.
Yesterday, the sterling was supported by upbeat manufacturing data. IHS Markit said that the record decline in British manufacturing faded in June as businesses experience a minor increase in production as the lockdown restrictions are gradually lifted. The UK’s manufacturing purchasing managers index (PMI) rose to 50.1 in June from 40.7 in May, in line with expectations. The 50 mark separates growth from contraction. The indicator exceeded that mark for the first time since February.
Rob Dobson of IHS Markit commented:
“Output edged higher and domestic demand firmed as lockdown restrictions loosened, factories restarted and staff returned to work. The planned loosening in COVID-19 restrictions on July 4 should aid further gains in coming months.”
It’s worth mentioning that the survey reflects the monthly performance, suggesting that the return to 50+ figures doesn’t necessarily indicate a recovery to pre-COVID levels. The good news is that optimism across manufacturing businesses rose to a 21-month high.
IHS Markit released the manufacturing PMI for India as well. The indicator rose to 47.2 in June from 30.8 in May, suggesting a decline at a slower rate. Indian companies recorded another sharp drop in employment.
The rapid increase in the number of new coronavirus cases in India might put additional pressure on manufacturers if the lockdown continues.
Pound Expected to Jump 4% By Year End
Investors also reacted to a recent Reuters poll that found that the sterling would gain about 4% by the end of this year if Britain and the European Union reach consensus on the post-Brexit relationship.
Simona Gambarini of Capital Economics said:
“Our central scenario is that some kind of Brexit deal or delay will be agreed. With this in mind, we think sterling will rise, however, given recent developments, the risks to our forecasts are to the downside.”
