GBP/INR keeps correcting in early trading on Friday but is set to end the week higher thanks to a rally that propelled it to the highest level since September 2015. At the time of writing, the pound buys 101.911 Indian rupees, down 0.02% as of 7:40 AM UTC. Yesterday, the sterling lost 0.40% against the Indian currency.
Earlier this week, the pound benefited from a weakness in the US dollar after Fed Chairman Jerome Powell said that the US central bank would maintain low interest rates despite inflation fears. His comments triggered a rally in risk assets, which helped the sterling as well. However, yesterday, the dollar has recovered along with a surge in US bonds. Meanwhile, many economists do not agree that the pound is a risk-on currency, so an immediate correction made sense.
At the beginning of February, Bloomberg cited HSBC as saying:
“[The pound’s] role as a risk-on currency is not well deserved.”
Besides this, the pound has been the best performing G10 currency of the year, so it has stuck in the overbought level for a while. The British currency has been boosted by the COVID vaccine optimism and Brexit relief, but a correction was needed.
Indian to Release GDP Data
Meanwhile, the rupee is steady against majors and is benefiting from the weakness in the pound. Economists expect India’s GDP data from the third quarter of the current fiscal year, which is scheduled for later today. Most analysts expect that the economy had shown signs of improvement after a slump in the past two quarters when the GDP collapsed by an aggregate 31%.
DBS Bank expects the GDP to have grown 1.3% in the three months to December, while Bloomberg economists anticipate 0.5% growth for the third quarter. For the current fiscal year as a whole, most economists expect a decline ranging from 6% to 7%.
However, India should experience a V-shaped recovery in the next fiscal year that starts in April. For example, rating agency Moody’s improved its outlook for the Indian economy to 13.7% for the coming fiscal after the 10.8% projection in October.