GBP/INR Slumps on Worsening UK Outlook
GBP/INR is in freefall, with the Indian rupee on track for its seventh consecutive daily gain against the beaten British pound sterling.
The rupee has added 3.25% against the pound in the last seven sessions and over 6.15% in the previous month. Moreover, the rupee’s gains extend the year-to-date advance to almost 9.00%.
The performance against the pound is in stark contrast to that against the US dollar. As GBP/INR languishes at a two-year low, USD/INR is nudging a record high. The main reason the British pound to Indian rupee exchange rate has fallen off a cliff is the UK’s dire economic outlook.
The energy crisis caused by Russia’s ongoing invasion of Ukraine has sent energy costs through the roof in Britain. To make matters worse, yesterday, Russian energy giant Gazprom shut down the Nordstream 1 gas pipeline to Europe. As such, Europe’s cost-of-living crisis may just be getting started.
Another factor playing into the rupee’s hands is lower oil prices. West Texas Intermediate oil (WTI) dropped over 12% last week. Considering India is the third-largest oil importer, the fall should help the nation narrow its trade deficit. However, the surprise closure of the Nordstream 1 pipeline put a bid under the energy markets on Monday. With crude rising 3.00%, tracking natural gas futures higher.
Nonetheless, the rise in oil will do little to offset the pound’s inherent weakness. And for that reason, we expect GBP/INR to plumb new depths in the weeks ahead.
British Pound to Indian Rupee Forecast
One thing stands out when looking at the daily price chart. The pound’s fall is incredibly steep, almost vertical. As a result, the Relative Strength Index (RSI) reads 26.8 (third lowest reading in two years). Based on this alone, you might expect GBP/INR to stage a reversal sometime soon. While we can’t discount a short-covering rally, in that event, we expect selling to emerge towards the June low’s around 94.77.
Due to the ferocious sell-off, there isn’t much in the way of support until the 2020 lows around 86.00. Although considering that’s almost 7% below the current price, and the low RSI, we’re unlikely to achieve that level soon. That being said, it remains a valid long-term target.
For now, the outlook is cautiously bearish. Cautiously, because of the low RSI and the heavy short pound positioning. However, it’s hard to form a bullish view on GBP/INR until the UK’s situation improves.
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