GBP: British Pound remains under pressure
At the Forex currency market the British Pound Sterling rate remains under the pressure this morning.
Forex forecast: MACD indicator is in the positive area for the pair GBP/USD, however it is going down, volumes have dropped as well, which gives a weak sell signal for the pair. Stochastic Oscillator has come out of the oversold zone, giving a pair buy signal.
Forex recommendations: off the market.
Feasible event scenario at Forex: in case of breakdown at the level of 1.6180, the levels of 1.6200 and 1.6220 will become the target for the purchase. If upward breakdown does not take place, the pair will consolidate close to the current levels.
It became known today that consumer confidence Nationwide in the UK fell to 43 points in April against the level of 45 points in March. Thus, decline in confidence among consumers confirmed the fears of the Bank of England about slowdown of the economy.
A lot of UK macro-statistics was released yesterday (index of CPI rose by 1.0% m/m (+4.5% y/y) in April against the forecast of growth by 0.7% m/m (+4.1% y/y); index of retail prices RPI increased by 0.8% m/m (+5.2% y/y) in April, which agreed with the forecast.)
Therefore, inflationary pressure in the country continues to grow.
The head of the Bank of England Mr. King noted commenting statistics that high level of inflation was triggered by the growth in VAT, prices for electric power and imports, and inflation would have been much lower if these three parameters were excluded. At the same time King found difficulty in replying when exactly inflation would return to the target level; however he knows exactly that the level of CPI will rise in the next few months. In addition the risk is increasing at the moment that high level of inflation can trigger the rise in inflationary expectations.
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, volume of assets purchase was also kept unchanged- at the level of stg200 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 to leave rates at the current level at least until the end of this year and throughout the 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.
However, the Bank of England think that interest rate will reach the level of 0.75% by the end of this year; while in QIV, 2012 it will be 1.75%, i.e. the Bank have made provisions for one fact of the rise in the indicator 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 grow slightly above 1.9% in two years time.
