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Market Commentary
GBP INR depreciates 3% in April - the positive momentum should continue: Angel Commodities Broking
Posted On : 2018-04-18 01:23:07( TIMEZONE : IST )
Mr. Prathamesh Mallya (Chief Analyst - Non-Agri Commodities & Currencies, Angel Commodities Broking):
"In the April 2018 till date GBPUSD had appreciated by 2% to 1.4323 backed by positive data sets from UK region and increase in the probability of a rate hike by Bank of England in the May'18 meeting and positive developments along smooth transition in the Brexit process.
The UK wages are set to turn positive in real terms for the first time in more than a year. UK wages including bonuses came in at 2.8% over the three months to February likely to surpass inflation(2.7% for MARCH 2018) for the first time since Jan'17.
The reason for the Bank of England to act on interest rates is the combination of decelerating inflation and accelerating wage growth that should support the household demand, a key element of the UK aggregate demand of the economic growth.
The increase in real income is all set to confirm the prophecy of the BOE Monetary Policy Committee member Ian McCafferty, who said last week that Bank should not delay hiking interest rates again due to a possibility of a faster pay rise.
However, the market is already pricing in an 80% probability of a bank rate hike in May, but it's still too early to increase expectations according to the market participants.
On the US front, trade war tensions with China had weakened the dollar index by 1 percent (in April 2018 till date) and in turn strengthening of GBPUSD pair.
Similarly in April 2018 till Date, GBPINR has also depreciated by 2.93% to 94.02 on account of major strength seen in pound. Also, widening of India's trade deficit to 28.5% to $13.7 billion in Mar'18, major capital outflows and increase in crude oil prices had weighed in negatively against the Indian rupee.
The latest news of US Treasury department putting India on its watch list for manipulation of currency values had depreciated rupee against all its major trading partners.
Spot GBPINR (94.02) trend is positive and possibly move higher towards 96.5, however not of caution is advised for investors at these points."
