GBP/INR is somewhat bullish in early trading on Thursday, but the pair tumbled 0.68% on Wednesday. At the time of writing, one British pound buys 98.167 Indian rupees, up 0.11% as of 6:00 AM UTC. Yesterday, the price broke above 99.000 for the first time in four years, hitting a daily peak at 99.320. However, it couldn’t consolidate above 99.000 and has dropped one percent from its high.
The decline has to do with the pair reaching overbought condition triggered by bulls. The price needed correction and is now back on track to update the year-to-date high, though it may take its time.
Sterling Reacts to Sentiment Around UK-EU Trade Talks
The pound has reacted to the post-Brexit optimism earlier this week after a UK government spokesman told media that he hoped a trade deal between Britain and the EU could be signed in September. His comments came as another round of negotiations started on Wednesday. Still, the two sides cannot reach consensus on several key aspects. An EU diplomat said:
“The state aid part of the level playing field and fisheries remain the main hurdles. If this moves, everything else will fall into place. This round should not bring major breakthroughs: eyes are on the last one in September.”
The UK left the European bloc in January of this year and has struggled to negotiate a post-Brexit trade deal since then. The deadline was set for December this year, and Prime Minister Boris Johnson ruled out any possibility of extension. A no-Brexit deal – which is the worst-case scenario for the British economy – looks more plausible for most investors. That means the trade between the two sides will consider the World Trade Organization terms, which includes quotas and tariffs.
Meanwhile, the British economy was hit by the COVID-19 pandemic and the subsequent lockdown measures. However, the pound managed to rally against the rupee as the Indian economy has experienced even more pressure from the pandemic.
Yesterday, Care Ratings said that India’s gross domestic product (GDP) would likely contract by 20% during the first three months of the current fiscal year, citing the disruptions caused by the lockdown.