GBP: British Poundcontinues to subside

At the Forex currency marketthe British Pound Sterling continues to subside at the beginning of a new week,tending to break down the level of 1.61.

Forex forecast: MACD indicatoris in the positive area for the pair GBP/USD and goes down, giving a pair sellsignal. Stochastic Oscillator goes down in the neutral zone and is shaping asell signal, approaching oversold zone.

Forex recommendations: in caseof breakdown at the level of 1.6100, the target for purchase will be the levelsof 1.6080 and 1.6050. If downward breakdown does not take place, the pair willconsolidate close to the current levels.

According to the Markit,household finance index fell to 35.1 points in June against the level of 36points in May. This is a negative signal for the British economy, indicatingthat unwillingness to spend money is still preserved.

Earlier, Finance Minister ofGreat Britain Mr. Osborne said that the country is on the track to recoveryalthough monetary and credit side of the economy remains weak. According to himthe British economy continues to struggle with difficulties, which willeventually lead to way out of the problems. As it became known in the middle ofthe week, consumer confidence index Nationwide in Great Britain rose to 55points in May against the forecast of 45 points, a maximum growth on monthlybasis in 2005. Thus, royal wedding had a stimulating effect.

The Bank of England believesthat interest rate will reach the level of 0.75% by the end of this year; whileby Q4 2012 it will be 1.75%, i.e. the Bank have made provisions for one rise ininterest in 2011 and four in 2012. Inflationary prospects were described as“uncertain” and Central Bank admits that CPI will reach the levelof 5% this year. Although the Bank of England expects that CPI will be slightlyabove 1.9% in two years time, Representative of the Bank of England Mr. Fishernoted earlier that bad state of economy could prompt the Central Bank tofurther policy easing. In addition, in case of unexpected economic downturnthere is a chance that economic stimulation with the help of repurchasing ofthe securities from the market will continue.

As reported in the edition of“Independence”, the Bank of England must be prepared to savenational economy from the threat of double dip recession, and according to thecomments of BDO representative, the regulator shall leave interest rate at thecurrent level of 0.50% per annum and do not use it as a shield againstinflation. Rating agency Moody's warned Great Britain earlier that the countrycan lose its AAA rating due to the inefficient fiscal policy.

Representative of MRS, Mr.Wheal, one of the remaining “hawks” in the Bank of England,stressed that the soonest rise in the interest rate will reduce the need forits further raise, and it is necessary to increase the rate despite the factthat the level of inflation turned out to be below the forecast. According tohim all conditions, required for the preventive measures of the Bank of Englandhave been created, and the sooner the BoE launches tightening policy, thegreater flexibility it will give to the regulator in the future.

It became known last week thatvolume of retail sales in the UK fell by 1.4% m/m (+0.2% y/y) in May. Sales inBritain demonstrated decline for the first time since January 2010, and it isnot a very good sign for the economy.