GBP: British Pound aroused interest of traders again

At the Forex currency market the British Pound Sterling is traded downward on Friday, continuing the movement which had started earlier.

Forex forecast: MACD indicator is in the positive area for the pair GBP/USD; however it started to move along the signal line and is not giving a clear signal. Stochastic oscillator is giving a pair sell signal.

Forex recommendations: if current bearish sentiment will be maintained for the pair and in case of breakdown at the level of 1.5890 the pair will go to 1.5830 and 1.5780.

It became known today that as per GFK/NOP, consumer confidence in Great Britain fell to -29, against the previous level of -21. Thus, the index is at the lowest level since 1994, which indicates consumers’ skepticism to the near -term economic outlook in the country.

The publication of the last meeting of the Bank of England prevented The pound from collapse on Thursday; 7 out of 9 members of MPC voted for the regulator’s decision to keep the rate at the level of 0.5% per annum, so the camp Sentence, which supports monetary policy tightening, was increased by one more vote, which was given by Vail. In addition Posen continues to vote for the volume increase of the assets redemption program. In general, the document stated that majority of the Bank members believe in the balanced risks; however, it is also not excluded that inflation will be higher than the forecast in the short term. Changes in the balance of power in the MPC in regard to the rate, completely fits our view, that current price of the Pound Sterling has already incorporated expectations of the monetary policy tightening. 

Nevertheless, to date the Pound demonstrates weakness, responding not as much to macro-statistics but mostly to the correlation of EUR/USD where the Dollar is regaining its positions today.

Meanwhile, public sector is still in a difficult situation in spite the fact that the reduction program has not entered yet its active phase. As the data released earlier shows, needs of the government in funds increased to the level of 27.85 billion GBP in December, while revenue in the budget from tax for the specified period amounted only to 27.34 billion pounds.

A week ago, representative of the Monetary Committee of the Bank of England Posen noted once again that the position of the regulator towards inflation has remained unchanged: The bank expects that inflationary pressure will reduce to the level of 2% soon and below, as fundamental factors, which take into account, for example, zero growth in base salary, give indications of this. We would remind that inflation in Great Britain amounted to 3.7% in December against the forecast of 3.4%. According to traders, it became evidence in favor of interest rate increase by the Bank of England. Market believes it is a settled matter because inflation has remained above target level of the regulator for 11 months.

 

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