GBP/INR forecast: monthly chart points to more rupee pain
The pound to rupee exchange rate has moved sideways recently and is hanging near its record high of 106.41. The GBP/INR pair was trading at 103.20, where it has been at in the past few weeks. This price is ~20% above its pandemic lows and 633% above its lowest point in 1984.
Bank of England and RBI decisions aheadCopy link to section
The biggest catalyst for the GBP to INR exchange this month will be the upcoming interest rate decisions by the RBI and BoE. India’s central bank decision will come first on June 8 while the BoE will conclude its meeting on June 22nd.
The two banks will likely take a diverging path this month. After raising interest rates by 250 basis points, the RBI will likely pause its policy this month. The pause will happen since there are signs that India’s inflation is easing and the economic growth is slowing. Annual inflation plunged to 4.7% in April this year.
On the other hand, I believe that the Bank of England has more to go considering that inflation is still sticky. Data published in May showed that while the headline consumer price index (CPI) dropped to 8.7% in April, core inflation jumped slightly.
Therefore, the bank has more work to do to bring inflation to its target of 2.0%. At the same time, the British economic growth is a bit weak, with external demand falling. Retail sales have dropped while home prices have resumed the downward trend.
Another reason for the rupee weakness is India’s trade with Russia. Russia now holds over $140 billion worth of rupees that it can’t use. Consider the recent statement by Russia’s foreign affairs minister:
Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today.
“We need to use this money. But for this, these rupees must be transferred in another currency, and this is being discussed now.”
GBP/INR forecastCopy link to section
Looking at the long-term monthly chart, we see that the Indian rupee is in trouble. It is hovering near an all-time high. As shown, 106.41 is the upper side of the ascending triangle pattern. In price action analysis, this pattern is usually a bullish sign. The pair has moved above the 25-day and 50-day moving averages.
Further, the Relative Strength Index (RSI) has moved above the neutral point of 50. Therefore, the pair will likely continue rising as buyers target the next key resistance point at 107. The stop-loss of this pattern is at 105.