GBP/INR bounces back on Monday, after crashing last week to the lowest level since October 2019. Currently, one British pound buys 91.626, up 1.08% as of 6:00 AM UTC. It is not certain whether the pair is planning recovery or it will continue to crash after touching a swing high.
Obviously, the only thing that drives all markets today is the coronavirus. The UK is more affected than India, but the pound may be stronger today on fears that the Indian economy would suffer more damage from the COVID-19 disease.
The rupee started to weaken after China reported that its factory production tumbled at the sharpest pace in three decades in January and February, as the virus spread and severe containment measures hit the dominant manufacturing industry of India’s neighbor and trade partner.
China’s the National Bureau of Statistics (NBS) said that industrial output declined by 13.5% year-on-year in the two months to February, while economists expected a slight increase to 1.5%. That was the worst performance since 1990, when Reuters started to monitor the gauge. In December, the indicator rose 6.9%.
Zhang Yi, chief economist at Zhonghai Shengrong Capital Management, commented:
“Judging by the data, the shock to China’s economic activity from the coronavirus epidemic is greater than the global financial crisis. These data suggest a small contraction in the first-quarter economy is a high probability event. Government policies would need to be focused on preventing large-scale bankruptcies and unemployment.”
Retail sales and fixed asset investment also noted the sharpest decline on record. Economists expect that the outbreak has reduced China’s GDP growth by 50%. Retail sales tumbled 20.5% in annual terms, after increasing 8% in December. Consumers isolated themselves and ignored crowded places like restaurants, shopping malls, and movie theatres.
China’s unemployment rate jumped to 6.2% in February, from 5.2% in December. This is the highest figure since the official records are released.
While the sterling is benefiting from India’s worries about China’s crashing economy, Britain is not in a much better position. Trade body Make UK and accountancy firm BDO said earlier today that UK manufacturing dropped sharply in January even before concerns about COVID-19.
As for the epidemic, British health authorities said yesterday that the number of deaths surged by 14 to 35, while the total cases rose by 20% to 1,372.