GBP/INR started the week off on the right foot, breaking above 96.000 as we anticipated last week. However, it hasn’t managed to consolidate above that psychological level as of now. Currently, it is trading at 95.911 as of 6:30 AM UTC. The pair hit the highest level since June 16 and then retreated. During the last seven consecutive bullish sessions, including today, the pair has gained over 1.90%.
The pound continues to rally on the optimism around Britain’s economic recovery after the government led by Prime Minister Boris Johnson lifted most of the stricter social distancing measures. UK companies have experienced the fastest growth in five years while consumers pushed spending close to pre-lockdown figures.
On Friday, IHS Markit released its early reading of the UK composite purchasing managers index (PMI), which rose to 57.1 in July from 47.7 in June. The 50 mark separates growth from contraction. The figure beat even the most optimistic forecasts. Nevertheless, it remains to be seen if a V-shaped recovery is indeed possible.
Chris Williamson, chief business economist at IHS Markit, commented:
“Even with the July rebound, there’s a long way to go before the output lost to the pandemic is regained and, while businesses grew more optimistic about the year ahead, a V-shaped recovery is by no means assured.”
Separate data from the Office for National Statistics showed that retail sales surged close to pre-COVID levels in June, driven by spending on clothes and home improvements.
Still, an increase in unemployment is putting a question mark over the longevity of the rebound.
India Sees Another Record in Daily COVID Cases
Meanwhile, the rupee continues to lose ground as rating agencies and banks downgrade India’s outlook to even lower levels, as the coronavirus cases continue to surge. On Sunday, the number of daily new cases in India exceeded the 50,000 mark for the first time ever.
At the end of last week, HDFC Bank downgraded India’s anticipated contraction to 7.5% in the current fiscal, down from a 4.8% decline it expected in May. The surge in COVID cases has forced local authorities in many states and cities to extend the strict lockdown measures.