Near-Term Pound to Rupee Rate Forecast

The Pound to Rupee exchange rate has now established the glowing embers of a young uptrend after establishing a sequence of higher highs and higher lows following the base at the 79.00 April lows.

This suggests the pair may be in an inchoate uptrend and consequently be expected to move higher.

The break above the 50-day moving average (MA) further enhances the probability it is in a broader uptrend evolving.

Ideally, we would like to see further verification from a break above the trendline and the 200-day MA at 84.00 before calling a change of trend.

Such a break is likely to be difficult under normal conditions given the 20-day moving average is usually a tough obstacle to break above.

Meanwhile, we see a strong probability that GBP/INR will still extend up to the trendline at 84.00 - although we would first seek confirmation from a break above the 83.52 highs - or 83.55 for added assurance, though it doesn’t leave much scope for profit.

Data for the Rupee

Overall the Rupee trades with a firm strengthening bias from a fundamental basis due to the strengthening and modernising economy, as well as the fall in commodities such as oil which India is a net importer of.

From a hard data perspective, there is a welter of data out on Friday, May 12.

The most important of which is Inflation data out at 13.00 GMT since it influences the Reserve Bank of India’s (RBI) rate setting strategy.

The RBI are likely to attach inflation vigorously given their avowed prioritisation of inflation targeting above other considerations.

A higher inflation figure could directly push up the Rupee.

Bank Loan Growth at 12.30 GMT, will also be widely followed because the Indian banking system is seen as vulnerable and has suffered particularly from a high number of non-performing loans, so loan growth will be seen as a healthy sign.

M3 Money Supply is also out at 12.30 on Wednesday, May 10.

Data, Events Ahead for the Pound

From a data perspective, the main release for the Pound is the Bank of England (BoE) rate meeting and the quarterly inflation report at 12.00 GMT on Thursday, May 11.

These events are referred to as super-Thursday events for Sterling as the dump of data and guidance can often impact on the currency for the next three months.

However, this particular event is not expected to see a change in policy owing to the ‘purdah’ preventing the authorities from making major announcements and changes to policies in the run up to the general election.

The BoE may downgrade growth expectations and raise inflation (notwithstanding the recent fall in oil), but according to analysts at Canadian lender TD Securities, the governor is expected to, “steer things back to neutral during the presser.”

Barclays expect the communication to be slightly hawkish, in an effort to boost the Pound and keep inflation at bay. Like TD they also see the bank likely to forecast inflation to rise and GDP to fall, although only during 2017, as falling oil prices will bite in 2018, slowing inflation in the longer-term.

“As for the communication, we believe the Committee will be eager to repeat its slightly hawkish message from the February inflation report, keeping the focus on inflation, and banking on the support provided to sterling to mitigate risks of excessively high and sticky inflation. Changes in forecasts will be consistent with such a move sideways as we expect GDP growth to be revised slightly lower but inflation slightly higher.  

Other important data released this week includes the RICS House Price Balance (Apr) at 00.01 on Thursday, May 11, Industrial and Manufacturing Production at 09.30 on the same day and the Trade Balance in March, also at 9.30.