GBP: Correction in British Pound did not take long to wait

At the Forex currency market the British Pound Sterling rate is being corrected on Thursday, amid deterioration of the situation in the pair EUR/USD, with which the Pound has been correlated closely lately.

Forex forecast: MACD indicator for the pair GBP/USD, has broken through the signal line from bottom to the top and is now in the positive area, maintaining a buy signal. Stochastic Oscillator tends to come out of the overbought zone and started to shape a sell signal.

Forex recommendations: off the market.Feasible event scenario at Forex: in case of break down at the level of 1.6340, the pair will go to 1.6355 and 1.6370.

If upward breakdown does not take place, the pair will consolidate at the current levels. Representative of the Bank of England Mr. Miles noted today that there is still a chance that British economy will slide into recession, according to him, economic growth rate has slowed down and no one can deny yet that there are problems with inflation, CPI might also continue to grow in the short term. In consideration of the data of the last 12 months production output increased only by 0.8%.

Finance Minister Osborne is confident that Great Britain continues to hold a status of a quiet habour, because national authorities are taking tough measures on fiscal policy. He believes that the country shall continue to adhere to consolidation plan to get rid of debts; meanwhile the Britain is able to keep away from recession. Rejection from the fiscal plan at the moment will become a real threat to economic growth, thinks Osborne. 

The report which was made public last week showed that CPI in Great Britain fell by 0.1% m/m (4.2% y/y) in June versus the forecast of growth by 0.2% m/m. In addition, overall trade balance in the UK amounted to -stg4.06 billion in May against the forecast of stg2.700 billion. It seems that the rise of imports in May triggered the growth of deficit in trade balance of the country.

According to the data released earlier, unemployment rate in the UK amounted to 7.7% in March-May, level of unemployed reduced by 26 thousand within the same period. The level of unemployed rose by 24 thousand in June, while unemployment rate amounted to 4.7%. The minutes of meeting of the Bank of England, which were made public earlier indicates that MPC ranks are still suffering from the split:  Will and Dale continue to vote for the rate increase by 25 basis points.

In general, most members of the Monetary Committee believes it is very unlikely that tightening of the monetary policy can take place in the short term, moreover, there is an opinion that most likely economic weakness will last longer than expected.It became known earlier that preliminary GDP in the UK increased by 0.2% on quarterly basis (+0.7% y/y) in Q2.Moody’s believe that the UK DGP will rise by 1.6% this year; in 2012 – by 2.1%; while the growth in 2010 had been by 1.3%. At the same time unemployment rate will vary in the range of 7.8-8.0%.

The forecast of the agency is based on the belief that the Bank of England will raise interest rate by 25 basis points before the end of this year and by another 1% -over the next year. 

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