GBP: British Pound declines in response to deterioration of the external background

At the Forex currency market the British Pound Sterling declines at the beginning of the week in response to deterioration of the external background. 

Forex forecast: MACD indicator for the pair GBP/USD goes down in the negative area, giving a sell signal; volumes are increasing. Stochastic Oscillator remains in the oversold zone and is giving a similar signal.

Forex recommendations: in case of break down at the level of 1.5805, the target for sale will become the levels of 1.5780 and 1.5750. If a downward breakdown does not take place, the pair will consolidate at the current levels.

So, external background is the crucial driver for the market. Investors do not see the light at the end of the tunnel in order to start buying.

At the meeting which was held last week,  the Bank of England decided to leave interest rate unchanged at the level of 0.50% per annum; volume of assets purchase was also left unchanged. Apparently, the Bank of England is not going to intensify stimulation of the economy, assuming that inflation will reduce by itself. It is interesting that a hawk has showed up again in the horizon of the British financial field; Andrew Sentence, ex-member of MPC said in the interview with “The Times” that he continues to adhere to the view that the rise of the interest rate by 50 basis points is necessary for the country. He also finds arguable expectations of the Bank of England that inflation will move away from the level of 4.50% in the near future.

Preliminary GDP in the UK increased by 0.2% on quarterly basis (+0.7% y/y) in Q2. The head of the Bank of England Mr. King noted this week commenting inflationary indices that, CPI can easily reach 5% and MPC can use interest rate or QE to control risks, if the need be.

As the data released the day before yesterday showed index of retail prices BRC in Great Britain increased by 0.1% m/m (+2.7% y/y) in August against the fall of 0.2% m/m a month earlier. However, annual gain amounted to 2.8% in July; obviously the CR continues to decrease. Expensive raw material puts pressure on consumer inflation, which is reflected in the indicator. According to Nielsen estimates about 40% of purchases were the goods involved in various promotions, which proves that the British do not want to spend money.

It also became known earlier that retail sales BRC in the UK fell by 0.6% y/y in August. Low level of consumption in Great Britain, along with the low consumer confidence and poor state of the real estate market has become the main reasons of the decline in the index. Demand is obvious only for food, while demand for clothes and household goods goes down sharply,- reported British Retail Consortium.