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Pound-to-Indian Rupee: Forecast, News and Data for the Rest of the Week

 

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The Pound-to-Indian Rupee continues rising as the Pound benefits from a more solid outlook due to increased chances of a November rate hike and slightly reduced hard Brexit risks.

The pair is in a strong short-term uptrend which will probably continue extending higher as there are no signs of reversal yet.

Last week we noted how the pair seemed to be forming a pennant pattern on the daily chart – this week it has broken out from the pennant and started to move higher.

Pennants are bullish continuation patterns which forewarn of higher prices.

They are small triangular patterns which look like the flags or ‘pennants’ which hung from medieval pavilions.

They are always preceded by a steep uptrend or ‘pole’ before the pennant forms.

The pole is used to determine the future target by extrapolating it 100% higher from the breakout point – or for a minimum target by 61.8%.

We have established two targets – one is at the 61.8% extrapolation of the pole at 90.00 Rupees to the Pound and the other is at a key level where the uptrend may encounter some heavy-selling, which is at 89.20.

For confirmation of a continuation higher, we should like to see a move above the 88.47 highs.

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Data, News and Events for the Rupee in the Rest of the Week

Something of a data dump will take place for the Rupee on Friday, September 29.

On that day Foreign Exchange Reserves, Bank Loan Growth, Deposit Growth, the Government Budget, Infrastructure Output and External Debt are all released. 

A large change in FX reserves can often be a warning sign for the exchange rate as it signals the central bank is active in the markets.

Bank Loan Growth could also be a key predictor of changes in GDP, since growth is often preceded by rises in lending.

News, Events and Data For the Pound in the Remainder of the Week

The fourth round of EU-UK Brexit negotiations commence on Monday, September 25.

The talks follow Prime Minister May’s Florence speech, with its 2-year transition and chief EU negotiator Michel Barnier’s moderately positive reaction to the speech, seems to be biased to supporting rather than undermining Sterling.

Negotiators are set to brief the press on the outcome of this round of talks on Thursday and the key for currency markets will be whether Barnier indicates he believes progress is being made.

The worst possible outcome for Sterling would be a disruptive Brexit - where negotiations fail to deliver a credible trading relationship between the EU and UK when the UK exits the Union in March 2019.

The first round of talks that see legacy issues and the practicalities of the exit dealt with must be cleared before talk of the trading relationship begins.

Also ahead, speeches by Bank Of England’s Mark Carney on Thursday and Ben Broadbent on Friday could provide potential focal points for Sterling traders.

The current market view is that the BOE is embarking on a tightening cycle with analysts now even pencilling in the likelihood of a November rate hike; and the speeches need to be read in light of that more hawkish backdrop.

Markets presently assign an 80% chance of a November rate rise.

Clearly an increase in hawkishness via stronger confirmation of a November rate move by either speechmaker would lead to fresh gains for the Pound, which is positively correlated to interest rates.

Data-wise, the next most significant release could be the Current Account for Q2, at 9.30 BST on Wednesday, September 27, which is forecast to show a slight reduction in the deficit to -15.8bn from -16bn in Q1.

A deeper contraction could help the Pound.

At the same time as the Current Account data is released Business Investment data will also be released for Q2 and will offer a further insight into the strength and resilience of the economy.