GBP: British Pound reverted to growth

At the Forex currency market the British Pound Sterling rate continues to grow on Tuesday after the fall at the beginning of the week, while external background remains stable.

Forex forecast: MACD indicator for the pair GBP/USD has crossed the signal line from top to bottom and started to increase, giving a pair buy signal. Stochastic Oscillator remains in the overbought zone and is giving a similar signal.

Forex recommendations: in case of breakdown at the level of 1.6550, the target for sale will be the levels of 1.6570 ? 1.6590. If upward breakdown does not take place, the pair can consolidate close to the current levels.

Trading floors were close in Great Britain yesterday due to the Banking Day.

According to the data released at the end of the week, the level of consumer confidence has increased in May by 10 points, to the level of -21 points against the level of -31 points in April. The report of GfK NOP said that the index fell short of forecast. However, it is worth noting that consumer confidence in the UK economic situation increased to -44 points over the last 12 months versus the previous level of -57 points.

The research company stresses that it is too early to expect effect from the budget, which was issued only last week, adding that despite the results of today’s reports, confidence remains low.

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.

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.

As per Nationwide estimates, British economy managed to renew its growth in QI, although it is very insignificant and therefore, prevents recovery of the housing market. House prices in the country rose by 0.3% m/m in May. Observers assess it as a sluggish increase: prices are still lower by 1.2% on annual basis than the level a year earlier. 

 

 

[More]