GBP to INR forecast: can the pair break out above all-time highs?
12:26, 23 June 2021
The exotic currency pair GBP/INR is popular for day trading and international remittances. A Statista study shows that India ranks number one in the international remittance market.
Remittance involves sending money home from a foreign country and is prevalent in emerging markets. The exchange rate plays an important role.
A World Bank research paper shows that remittances are now the second biggest inflows after Foreign Direct Investment (FDI). While FDIs rise and fall, remittances remain stable because they’re payments to families back home.
When trading the GBP/INR exchange rate, traders should keep this in mind, besides the usual economic, trade and monetary policy comparisons.
The British pound remains historically strong against the Indian rupee but this could change in the coming quarters.
Let’s take a look at the GBP to INR future and examine factors that will influence the pair’s exchange rate.
GBP to INR exchange-rate analysis
Despite COVID-19 disruption, India’s economy remains well anchored.
Pre-COVID, the nation was the fifth largest in terms of nominal GDP (in USD), according to the International Monetary Fund’s World Economic outlook database of April 2021. In 2020 it dropped one spot, with the UK moving ahead. On the Asian continent, India ranks second after China.
Growth is expected to return gradually, with the UN raising its growth forecast to 7.5% for 2021, according to their mid-year World Economic Situation and Prospects report.
When analysing the GBP/INR exchange rate, interest-rate differentials also play a key role.
Meanwhile, the Organisation for Economic Co-operation and Development (OECD) predicts the UK’s economy will rise 7.2% in 2021.
It marks one of the fastest increases among the developed economies and tips GDP growth at par with India.
As a country that enjoys the largest inflows of global remittances, India needs to maintain higher interest rates.
In the UK, central bank rates remain suppressed since last year. But interest rates in India have been kept at 4% in 2020-2021, which is more attractive for savers than parking money in British pounds.
Interest rates should not be viewed in isolation. Inflation plays a major role in eroding the purchasing power of a currency. India currently targets a 4% inflation rate, with a tolerance of 2% and 6%.
Keep an eye on the India-UK trade deal
In a post-Brexit period, the UK needs to renegotiate trade agreements individually with trading partners.
As far as bilateral trade is concerned, the UK ranks 18 in India’s trading activity, with the United States, China and the United Arab Emirates occupying the top three spots as of December 2020.
In May 2021, the UK announced a £1bn trade deal with India and a commitment to negotiate a free trade agreement, which is expected to double trade between the two countries from the current £23bn.
The outcome of these negotiations will determine which of the two economies becomes the net beneficiary in monetary terms. As of June 2021, the UK runs a trade deficit of £5.1bn with India.
GBP to INR forecast – technical Outlook
To estimate the GBP to INR prediction using technical analysis, we can look at the GBP/INR weekly chart. Prices are nearing the all-time highs, but there’s also a strong area of resistance near the 107.036 – 105.62 region.
Given the rate’s current momentum, a reversal near this zone seems possible. A breakout above this resistance area needs to be validated by strong fundamentals.
The base scenario is for a probable reversal near the resistance area in the medium to long-term. On the GBP/INR price chart, we see consolidation forming a rising wedge pattern – a technical pattern that signifies potential downside momentum building up.
Traders should also watch the 104.00 price area. If there’s rejection at this level, the GBP/INR may start looking to the downside. The medium-term trendline will be critical. A sustained break below this rising trendline is likely to confirm the downside bias.
If this outlook is correct, we could see the GBP weakening against the INR toward the 98.00 level in the medium to long-term. The price area of 98.00 is another critical area of support. This could potentially help stall the currency pair from posting further declines.
This bearish view on pound to rupee prediction is likely to change if the pound strengthens above the 105.62 – 107.03 level.
Traders should note that a single technical analysis is not enough to build a thorough pound to rupee forecast. You should conduct comprehensive fundamental and technical research before making a decision about including the forex pair or any other asset in an investment portfolio.
Always remember your decision to trade depends on your attitude to risk, your expertise in this market, the spread of your investment portfolio and how comfortable you feel about losing money.
FAQ s
When will GBP to INR increase?
After the 2016 Brexit uncertainty, the exchange rate for pound to Indian rupee turned higher. For over four years the GBP/INR has remained in a steady uptrend, according to its historical price chart.
Overall, the pound to rupee is up 23.13% since 2017. At the time of writing (23 June 2021), the GBP/INR currency pair is hovering around the February 2014 highs of 103.64.
If the GBP to INR exchange rate closes above 107.03, the all-time highs from August 2014, it would mark a new uncharted territory for the currency pair.
What factors affect the Indian rupee?
To trade GBP/INR exchange rate, traders need to pay attention to GBP/INR news.This includes tracking the economic and monetary policy developments of both economies.
The coronavirus pandemic remains to the fore, disrupting daily life and business. The sooner the authorities in India can deal with the pandemic, the faster they will be able to focus on economic growth.
As India is an emerging market economy, the strength of the US dollar and the US rates will be important in gauging the GBP vs INR forecast, as most of India’s foreign trade and foreign debt is denominated in USD.