What’s going on with the pound to Indian rupee (GBP/INR)?

The GBP/INR exchange rate retreated as traders digested the latest developments in the UK and India. The pair pulled back to a low of 105.17, lower than last Friday’s high of  105.93 as UK gilts inched upwards.

The GBP/INR pair retreated after the hotter-than-expected UK housing report. According to Halifax, house prices in the UK rose for the third straight month in December, signaling that there is still more demand.

House prices rose by 1.1% in December from November and by 1.7% from the same period in 2022. These numbers were higher than the median estimates of 0.1% and 1.5%, respectively.

This report had an immediate impact on the UK financial market as the FTSE 100 and FTSE 250 indices pulled back. In the same period, sterling retreated against the US dollar while gilt yields inched upwards.

Most importantly, economists have pared back their rate cut expectations. The futures market now expects that the Bank of England (BoE) will deliver 130 basis points cuts, lower than the expected 150 basis points. 

The housing data came a day after the UK published encouraging mortgage and services data. According to the Bank of England (BoE), mortgage approvals rose to 50.07k in November from 47k in the previous month.

S&P Global also said that the country’s services PMI increased to 53.4, higher than the expected 52.7. This led to a better performance of the composite PMI, which jumped to 52.1 in December.

The GBP/INR pruce also retreated after better estimates of India’s GDP growth for 2022. In a report, the UN estimated that the economy will outperform its peers and expand by 6.2% this year. The government is estimated to project a 7% growth for the year as it continues to narrow its gap with Germany. 

GBP/INR chart by TradingView

The Indian rupee has generally weakened against sterling in the past few years. It has retreated by over 23.6% from its lowest point since  September 2022. On the daily chart, the GBP/INR pair has formed a small ascending channel shown in blue. It remains slightly above the 50-day and 25-day Exponential Moving Averages (EMA).

The pair remains slightly below its all-time high of 107.93, its highest point on July 14th. Therefore, I suspect that the pair will remain in this range in the coming weeks. More upside will only be confirmed if the pair moves above the key resistance at 106.50, the higher side of the ascending channel.

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