Pound Seen Hitting 'Higher Highs' against Indian Rupee
The Pound-to-Rupee exchange rate is moving higher as it breaks out a bullish chart pattern which advocates for yet further gains.
GBP/INR charts are showing the breaking out of a triangle-like chart pattern which it has been forming ever since September 2017. The development bodes for further advances we believe.
A spike higher of late, on the back of weak inflation data from India and a strengthening Pound, sent prices above the key triangle component 'b' wave highs at 87.50, confirming an upside break.
According to our previous analysis, the exchange rate should continue higher to a target situated at 89.10, calculated by extrapolating the height of the triangle by 61.8% of its widest point.
61.8% relates to the 'Golden Ratio', a mysterious mathematical phenomenon that dictates many proportions in nature and also it is argued, financial markets, and is equal to 0.618.
Get up to 5% more foreign exchange by using a specialist provider to get closer to the real market rate and avoid the gaping spreads charged by your bank when providing currency. Learn more here.
Data and Events to Watch for the Indian Rupee
The most important release for the Rupee this week was wholesale inflation data for December, which has already been released this morning at 06.30 GMT.
This showed a lower-than-expected rise in prices of only 3.58% compared to the 4.00% consensus forecast, and the 3.93% previous print in November.
After the release of the inflation data, there were calls for the Reserve Bank of India (RBI) to reduce interest rates in order to stimulate more growth.
"As the inflation numbers are being driven largely on account of supply-side factors, we urge the Reserve Bank of India to calibrate its monetary policy stance giving equal weight to growth consideration," said the Federation of Indian Chamber of Commerce (Ficci) President Rashesh Shah to financial news website moneycontrol.com
Data and Events for the Pound
The key data release for the Pound is inflation data out at 09.30 on Tuesday, January 16, which is forecast to ease to 3.0% compared to the same time in the previous year, from 3.1% in November.
Core inflation is likewise forecast to ease to 2.6% from 2.7% previously.
A higher-than-forecast print will probably strengthen the Pound as it will increase pressure on the MPC to increase interest rates in order to try and limit future inflation levels.
Higher interest rates are positive for currencies because they draw greater inflows of foreign capital with the promise of higher returns.
Analysts at TD Securities are marginally more hawkish, expecting inflation to remain at 3.1% and not fall back in December.
"Our 3.1% forecast for headline CPI is just above the top of the BoE's target range and well above the BoE's forecast of 2.7% from the Nov Inflation Report. Core CPI should soften by a tenth, but the big jump in energy prices into the end of the year will keep the headline well-supported," say TD Securities in a note to clients ahead of the new week.
Friday sees the release of retail sales data which often moves Sterling as it gives an insight into the health of the UK consumer.
The UK economy is heavily reliant on the retail sector and should data beat expectations we would expect some positive response in Sterling.
The bar is actually set quite low for a positive surprise as monthly retail sales for December is forecast to show a decline of 0.6%, a slowing from the previous month's growth of 1.1%.
Monday sees the Bank of England (BOE) in focus with a speech from Silvana Tenreyo (above), the new member of the Bank's Monetary Policy Committee (MPC), at 18.15 GMT on Monday, January 15.
Not long after she first joined the BOE back in October 2017 Tenreyro said she would want to see UK employment improve and wages rise further before advocating raising interest rates - a move which would be bullish for the Pound.
"Silvana Tenreyro, an external MPC member, said she would need to see more evidence of the elimination of slack in the labour market before voting for a rate rise," says Chris Giles, Economics Editor at the Financial Times.
Yet the unemployment rate has not fallen since she said those comments and instead has stayed the same at 4.3% since September 2017, so assuming this is still her view, we do not expect her to talk up interest rates on Monday, which is on margin negative for Sterling.
(Image courtesy of tradingeconomics.com)
Get up to 5% more foreign exchange by using a specialist provider to get closer to the real market rate and avoid the gaping spreads charged by your bank when providing currency. Learn more here.