GBP: British Pound determines movement direction

At the Forex currency market the British Pound Sterling started to decline again on Thursday, however signals for the pair GBP/USD remain multidirectional, which indicates the trend forming process.

Forex forecast: MACD indicator is n the positive area for the pair GBP/USD; however it started to move along the signal line and has not formed a clear signal today. Stochastic Oscillator is not giving a clear signal either today.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 1.5940 the pair will go to 1.6000 and 1.6050. If the upward breakdown will not take place the pair will continue to consolidate in the range.

By the way, yesterday’s fall of the Pound was regained in the afternoon when the minutes of the last meeting of the Bank of England were made public.

Thus, 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, 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 Sterling has already incorporated expectations of the monetary policy tightening. 

As it became known earlier, GDP in Great Britain fell by 0.5% on quarterly basis in QIV against expectations of growth by 0.5% q/q. According to the official information, bad weather this winter has affected customer’s demand.

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.

Last Friday, 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. It is interesting to know how authorities are going to achieve this.

 
 

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