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The pound to INR (GBP/INR) pair continued its recent sell-off as the UK and Indian economies diverged. The pair slipped to a low of 100.32, the lowest level since March 28th. It has slipped by more than 6.40% from the highest point this year.
UK and India divergence
The UK and Indian economies are diverging. On the one hand, the British economy is shrinking as the cost of living crisis escalates and the impacts of Brexit settle in. The headline consumer price index (CPI) remains above 6%, one of the biggest in the G7. The economy is barely growing as key sectors like manufacturing remain under pressure.
The Indian economy, on the other hand, is firing on all cylinders. As I wrote here, inflation is falling and analysts believe it will be the fastest-growing economy in the emerging market. It has already overtaken the UK to become the 5th biggest economy in the world after the US, China, Japan, and Germany.
India has done well in the past few years, helped by the rising investments from western countries. Companies like Google, Amazon, and Meta Platforms have all invested billions of dollars in India in the past few years.
Meanwhile, India has also benefited from the ongoing war in Ukraine by importing cheap Russian oil, refining it, and exporting it to other countries. While India has little oil and gas resources, it has become one of the biggest petroleum exporters in the world. Further, India is seeing more foreign investments by companies moving from China.
Looking ahead, the next important catalyst for the GBP/INR pair will be the Reserve Bank of India (RBI) decision scheduled for Friday. Economists expect the bank to keep rates unchanged since inflation is stabilising. If this happens, the cash reserve ratio will remain at 4.50% while rates will remain at 6.50%.
GBP/INR technical analysis
On the daily chart, we see that the GBP to INR pair has been in a strong bearish trend since July. It has now moved below the 23.6% Fibonacci Retracement level. At the same time, the 100-day and 50-day moving averages are making a bearish crossover.
The pound to rupee pair has also moved below the key support level at 101.61, the highest swing in February. Also, the Relative Strength Index (RSI) and the MACD have continued falling. Therefore, the pair will likely continue falling as sellers target the key support at 98.
The post GBP/INR forecast: Indian rupee upside to continue? appeared first on Invezz
