GBP: British Pound Sterling still has growth potential

At the Forex currency market the British Pound Sterling rate started to go down at the beginning of this week after rapid growth last week.

Forex forecast: MACD indicator for the pair GBP/USD started to grow moderately in the negative area, shaping a buy signal; however volumes are decreasing. Stochastic Oscillator is still in the overbought zone, maintaining a buy signal.

Forex recommendations: in case of break down at the level of 1.5810, target for purchase will be the levels of 1.5830 and 1.5850. However, if specified level is not broken down, the pair will have a chance to resume its decline.

Statistics released this morning showed that house price index Rightmove in the UK rose by 2.8% m/m (+1.2% y/y) against preliminary expectations of grow by 0.7% m/m.

The survey demonstrated that there is a huge gap between the house prices in the North and South, as in the Southern part of the country the price is still twice as high as in the North.

As it became known earlier retail price index BRC in the UK increased by 0.2% m/m (+2.7% y/y) in September. Volume of retail sales BRC in the UK increased by 0.3 y/y in September. Thus, according to the survey of the British Consortium of Retailers volume of retail sales rose slightly on annual basis last month; however monthly dynamics is mixed. Prices for food continued to grow, demand for clothes and footwear fell despite the seasonality. Therefore, basic demand is minimal at the moment. As it became known earlier volume of production output in the UK increased by 0.2% m/m (-1.0% y/y) in August.

Deputy head of the Bank of England Mr. Bean said last week that British regulator is ready for follow-up actions in addition to the expansion of the asset purchase program to stg75 billion, adopted last week. Bean has clarified that the Bank of England will agree to additional economic stimulus if economic outlooks will suddenly worsen, for example if recovery rate will slow down significantly.

We would remind that in the outcome of the meeting in October, the Bank of England decided to leave interest rate unchanged at the level of 0.50% per annum, at the same time increasing volume of the assets repurchase program. Therefore, QE was increased to 275 billion pounds against the previous level of 200 billion pounds. In the follow-up comments the head of the Bank of England Mervin King said that the expansion of the assets repurchase program has been provoked by the slow growth of the global economy, however QE will have a positive impact on the British economy in the future. According to him these measures are preventive since Britain is in the middle of the drastic crisis now.