GBP/INR is bullish on Thursday, after showing some signs of weakness yesterday. Currently, one British pound buys 95.295 Indian rupees, up 0.33% as of 6:30 AM UTC. If the pair breaks above 95.375 – the peak of July 13 – then it might target the next psychological level at 96.000. Otherwise, a retreat would form a double top, which is a common bearish pattern.
The Brexit pessimism is weighing on the sterling, but the rupee is doing even worse as the strict lockdown continues in key states and cities. India saw another record daily increase in the number of COVID-19 cases.
Singaporean brokerage firm DBS downgraded its forecast for India, expecting a 6% contraction in the fiscal year 2021. Previously, DBS analysts anticipated a 4.8% GDP decline for the year. DBS economist Radhika Rao said:
“We temper growth forecasts to minus 6 per cent for FY21 due to the prolonged sub-normal reopening as the country is yet to stabilize the infection curve and the pandemic is going to take a deeper economic bite.”
US-China Tensions Bode Well for India
In the longer-term, India might benefit from the worsening Sino-US tensions. Yesterday, the Trump administration ordered China to close its consulate in Houston. The US accused China of illegal spying and potential theft of research. This comes on top of a series of conflicts between the world’s two largest economies, which revolve around the trade relationship, Hong Kong, and surveillance. The US hinted on several occasions that it would like to move production from China to countries like India.
Yesterday, Indian Prime Minister Narendra Modi said that India and the US could play an important role in pushing the global economy recovery. He urged American investors to focus on India.
Speaking at the India Ideas Summit organized by the US-India Business Council (USIBC), Modi said:
“US-India friendship has scaled many heights in the past. Now it is time our partnership plays an important role in helping the world bounce back faster after the pandemic.”
Elsewhere, the UK is also aligning with the US in the Hong Kong matter. Previously, Britain decided to remove China’s Huawei from its 5G network.