GBP: British Pound is growing despite ambiguous signals

The British Pound Sterling rate continues to grow at the Forex currency market, although activity in the pair is low.

Forex forecast: MACD indicator for the pair GDP/USD has broken through the signal line from top to bottom and is traded in the negative area, giving a sell signal. Stochastic Oscillator continues to go up in the neutral zone and has already reached the border of the overbought zone, giving a buy signal.

Forex recommendations: in case of breakdown at the level of 1.5715 the target for the buying will be the levels of 1.5720 and 1.5740. If sellers are back in the pair, the Pound may move to 1.5645.

It became known yesterday that PMI index in the manufacturing industry amounted to 47.6 points in November, as per CIPS/MARKIT estimates. The index is above expectations which supported growth of the Pound.

Previous rapid growth of the Pound was based on the decision made by the U.S. Federal Reserve together with the world’s Central banks (including the Bank of England) to lower the rates on swop by 50 basis points. Later the governor of the Bank of England Mervyn King said that he personally, as the head of the Eurogroup initiated discussion of the idea on swops. He believes that adopted measures will bring temporary relief, however will not enable to resolve fundamental problems.

It also became known this week that rating agency Fitch did not excluded probability that the UK ranking could be downgraded, as national budgetary reserves of the country have been rather depleted.  The agency believes that economic growth rate in the UK will slow down and influence of the European debt crisis will increase, which will eventually challenge current rating of the country.

Representative of the Bank of England Mr. Weale believes that economy of the country will not reach pre-crisis levels until Q3 2013, and growth of capital will support consumption. He believes that monetary policy alone cannot fix up economy and there is a high possibility that QE will be launched if the state of economy does not improve after the first round of stimulation. Weale also indicated that there are signs of new recession.

According to NABE unemployment rate in the UK will be around 8.7% in 2012 against previous forecast of 8.5%; there is a chance that employment will increase up to 100 thousand in Q4 this year. It is expected that policy of the Bank of England will continue to be soft next year and GDP will amount to 2.2% in Q1 next year against predicted level of 2.5% in Q4 this year.