GBP/INR continues the bullish stance on Tuesday, after securing a modest gain yesterday. Currently, one British pound buys 93.513 Indian rupees, up 0.35% as of 6:40 AM UTC. Nevertheless, the pair still hasn’t determined a clear trend to follow.
The pound reacted positively on construction activity data released by IHS Markit yesterday. British construction companies beat analysts’ expectations by returning to growth for the first time since the lockdown was imposed in mid-March.
The construction purchasing managers index (PMI) surged to 55.3 from 28.9 in May, the highest level since July 2018. The 50 mark separates growth from contraction.
The growth was driven by housebuilders, though commercial constriction also increased in activity.
Tim Moore of IHS Markit commented:
“As the first major part of the UK economy to begin a phased return to work, the strong rebound in construction activity provides hope to other sectors that have suffered through the lockdown period.”
It’s worth mentioning that the PMI survey is monitoring business activity from month to month. Thus, the surge above 50 takes May data for reference. That means that activity hasn’t necessarily returned to pre-COVID levels.
Moore added:
“While some survey respondents commented on cautious optimism about their near-term prospects, construction companies continued to face challenges securing new work against an unfavourable economic backdrop and a lost period for tender opportunities.”
The survey showed that construction companies continued to reduce jobs at a fast pace.
Citigroup Cuts Forecast for India Sharply
As for the rupee, the currency continues to be under pressure as the daily number of COVID cases is rapidly increasing. Citigroup reduced its forecast for India’s gross domestic product, citing the pandemic. India’s economy will contract 6% in the first year 2021, Citi said, which is way worse than its initial estimate for a 3.5% contraction.
India has the world’s third-largest tally of coronavirus cases, surpassing Russia in the weekend. Citi’s chief economist for India, Samiran Chakraborty, said:
“The delay in flattening the curve has been one of the primary reasons for our forecast revision. The spread of the virus has largely followed the ‘Most Severe’ scenario in our forecasts.”
