GBP to INR hits five years high after the Central Bank of England and the Reserve Bank of India (RBI) kept the interest rates unchanged.
Reserve Bank in a surprising move hold rates unchanged at 4% and the reverse repo rate at 3.35% halting the easing cycle (for now). India’s central bank has cut the interest rates by 115 basis points since February 2020. In 2019 the RBI cut interest rates by another 135 basis points from 6.50%. RBI kept interest rates on hold in a move to contain the rising retail inflation.
The Bank of England also kept interest rates unchanged at record low levels of 0.1% and left the asset purchases programme unchanged. The BOE expects the UK economy to contract by 9.5% in 2020 before returning to growth by 9% in 2021. The previous projection by the BoE was for a GDP contraction of 14%. Bank of England (BoE) warned that the unemployment rate would remain high around 7.5% this year. The inflation expected to be subdued and will reach 2% in two years. Regarding negative rates the central bank is reviewing that scenario but noted that negative rates would weaken the UK financial sector more, thus destabilizing the already fragile UK economy.
On the economic data, the United Kingdom Construction PMI registered in at 58.1, topping the expectations of 57 in July.
GBP to INR is 0.36% higher at 98.7315 making fresh four year highs as the rally that started in July 20 gains traction above 98. The Indian rupee was sold off aggressively as the new coronavirus cases continue to rise in the country. The technical outlook is clearly bullish, and any pullback should be considered as a buying opportunity. The RSI 14 index continues inside the overbought area and at extreme levels; a sharp correction can’t be ruled out but would offer an entry opportunity.
On the upside, minor resistance stands at 98.7871, today’s high. A break above 98.7871 would open the way for 99.2062 the high from May 26, 2016.
On the downside, first support for GBPINR is at 98.2242 the daily low. Next support zone would be met at 96.8910 the low from July 30. A break below 95.1815 – the 50-day moving average – would invalidate the positive momentum.
