GBP: British Pound Sterling continues to grow

At the Forex currency market the British Pound continues to ascend on Tuesday amid external positive factor.

Forex forecast: MACD indicator is in the positive area for the pair GBP/USD and continues to go up, giving a pair buy signal.  Stochastic Oscillator is giving a similar signal today, being in the neutral zone.

Forex recommendations: if current sentiments of the market will be maintained and in case of breakdown at the level of 1.6060 the pair will go to 1.6100 and 1.6165.

Apparently, purchase of the GBP will be continued due to the rumors about possible increase in the interest rate in the coming quarters.

Note, that according to the analyses, made by National Institute of economic and social researches “NIESR” and released today, The UK government shall postpone for some time a program of budget expenses reduction, since the strategy can lead to huge losses in economy, rather than to benefit. The statement made by The UK prime-Minister Cameron yesterday partly proves that this year will be extremely difficult for the country’s economy. We would remind that as it became known on Friday consumer confidence in the UK fell to -29 in January, as per GFK/NOP, against the previous level of -21. Thus, the index is at its lowest level since 1994, which indicates consumers’ skepticism regarding prospects of the economy in the nearest future.
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.

Recall that the minutes of the last meeting of the Bank of England was made public last week; 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, which was given by Vail. In addition Posen continued 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 Pound Sterling has already incorporated expectations of the monetary policy tightening.  

 

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