GBP/INR continues to hover near the strong support level at 97.300. Currently, one British pound buys 97.315 Indian rupees, down 0.13% as of 6:20 AM UTC. Yesterday, the price fell 0.35%, but the largest timeframes point to a sideways trend. If the pair breaks below the current support at 97.300, then we might see the continuation of a downtrend.
The pound has been losing ground as the UK’s composite and services purchasing managers index (PMI) failed to match the preliminary reading for August. Yesterday, IHS Markit said that the composite PMI, which merges both the dominant services sector and manufacturing industry, rose to a six-year high of 59.1 from 57.0 in July. Still, the preliminary reading suggested a surge to 60.3. Note that the month-to-month performance doesn’t necessarily mean that activity has returned to pre-COVID levels.
Despite an increase in demand, job losses at UK firms accelerated last month, the survey said. This doesn’t bode well for the British economy, especially when the government is about to conclude its coronavirus furlough scheme next month. The survey’s index of employment dropped for the first time in three months.
Chris Williamson, chief business economist at IHS Markit, commented on the companies’ ability to deal with the withdrawal of economic support:
“Worryingly, many companies are already preparing for tougher times ahead, notably via further fierce job cutting. Policymakers face a huge challenge in sustaining this recovery and avoiding a ‘bounce and fade’ scenario.”
The services PMI increased to 58.8 in August from 56.5 in the previous month, the highest since April 2015. The preliminary reading suggested an increase to 60.1.
UK Not Sure About Potential Trade Deal with EU
The sterling is under pressure also because of the post-Brexit uncertainty, with the final negotiations being scheduled for next month. The Times reported that senior officials in British Prime Minister Boris Johnson’s office saw only a 30%-40% chance that the two sides would reach consensus, given that the EU doesn’t want to give up on state aid rules.
James Forsyth, political editor of The Spectator, stated:
“The sticking point isn’t fish — I’m told that there is a ‘deal to be done’ there — but state aid.”
