GBP/INR continues to fluctuate near 100, as it hasn’t managed to consolidate above the psychological level. At the time of writing, the pound buys 100.025 India rupees, up 0.07% as of 7:20 AM UTC. The pair is getting closer to the resistance of a sideways channel that started in mid-December of last year.
The pound received a boost after the Bank of England ruled out negative interest rates once again, at least in the short term. Besides this, investors are optimistic about the vaccination program. So far, over 12 million Britons got the first shot of one of the approved COVID vaccines, the government said on Sunday. Also, the number of new cases and deaths has visibly declined, suggesting that the national lockdown and the vaccines might work.
India Shows Signs of Recovery
Meanwhile, the rupee is losing ground even though its fundamentals are also improving. Yesterday, the National Council of Applied Economic Research (NCAER) said that its Business Confidence Index (BCI) improved between the second and third quarter of the current fiscal year amid the rollout of COVID vaccines. The proportion of those who expect an increase in overall economic conditions within the next six months rose by 4.8%, from 29.8% in Q2 to 34.6% in Q3.
Last week, the Reserve Bank of India (RBI) maintained the repo rate unchanged at 4% and lowered the retail inflation projection for the current fiscal year at 5.2%. The central bank expects the economy to recover from now on.
Rating agency Moody’s also expects a V-shaped recovery. It projected India’s nominal GDP growth at 17% for the coming fiscal year that starts in April. The outlook improved from the previous projection at 14.3%, as Moody’s cited the “pro-growth” budget. The agency said last week:
“The budget’s focus on higher capital expenditure, financial sector reforms and asset sales will help to stimulate growth and supply broad-based credit support.”
Investors are also focusing on the trade negotiations between the European Union (EU) and India. After an investment deal with China, the EU is betting on India, seeking a trade deal that will focus on sustainable development, green technologies, and supply chains.