GBP: British Pound has slowed down its growth
At the Forex currency market the British Pound Sterling rate slowed down its growth, which has been observed for the last two trading days.
Forex forecast: MACD indicator for the pair GBP/USD has crossed the signal line from top to bottom, started to increase, and is ready to merge with the signal line, giving a pair buy signal. Stochastic Oscillator has reversed in the neutral zone, and is giving a buy signal.
Forex recommendations: in case of breakdown at the level of 1.6420, the target for purchase will be the levels of 1.6450 and 1.6480. If upward breakdown does not take place, the pair can consolidate close to the current levels.
A meeting of the Bank of England will be held on Thursday this week. According to the economists from Barclays, regulator will raise the rate not in August but in November because new signs of weakness in the British economy and its dependence on the external demand are not favourable at the moment to start monetary policy tightening.
At the same time, the Bank indicated that according to the swap curve SONIA, which reflects weighted average index of the Pound - Overnight, the rise in the rate should not be expected before 2012- by 25 basis points.
We would remind that at the regular meeting the Bank of England has left interest rate unchanged at the level of 0.50% per annum and volume of assets purchase was kept unchanged - at the level of GBP200 billion. The situation in the British economy is still far from being stable.
Deloitte & Touche LLP believe that the Bank of England will not raise rates until 2013 – according to observers economic growth in the country is still poor, basic economic trend in the UK is also not too good, which encourages them to leave rates at the current level at least until the end of this year and throughout next year as well. Inflation in the country is twice as high as 2% projected by MPC. Deloitte & Touche LLP indicates that British GDP will amount to 1.5% in 2011, the same as next year; while inflation will reach 4.5% in 2011 and 1.8% in 2012.
Representative of the MPC of the Bank of England Mr. Sentence who is going to retire next week noted this week that he has always stood for gradual rise in the interest rate and the level of confidence in the Bank of England can suffer, due to the current financial situation. He also stressed that existing situation does not require urgent special changes in the monetary policy, however sharp increase in rates is possible in the future.
The Bank of England thinks that interest rate will reach the level of 0.75% by the end of this year; while by Q4 2012 it will be 1.75%, i.e. the Bank have made provisions for one rise in interest in 2011 and four in 2012. Inflationary prospects were described as “uncertain” and Central Bank admits that CPI will reach the level of 5% this year. Although the Bank of England expects that CPI will be slightly above 1.9% in two years time, Representative of the Bank of England Mr. Fisher noted earlier that bad state of economy could prompt the Central Bank to further policy easing. In addition, in case of unexpected economic downturn there is a chance that economic stimulation with the help of repurchasing of the securities from the market will continue.
He also noted that he would think about the second round of QE.
