GBP: Decline of British Pound came to a halt
At the Forex currency market the British Pound Sterling rate has slowed down its decline on Thursday, however there is a chance that sales will continue – market is obviously not prepared for risk.
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 is going down in the neutral zone, giving a sell signal.
Forex recommendations: in case of breakdown at the level of 1.6320, the target for purchase will be the levels of 1.6300 and 1.6280. If downward breakdown does not take place, the pair can consolidate close to the current levels.
Yesterday, representative of the Bank of England Mr. Fisher noted that weak state of economy could prompt the Central Bank to start further policy easing. In addition, in case of unexpected economic downturn there is a chance that economic stimulation with the help of repurchasing of the securities from the market will continue.
Representative of the MPC of the Bank of England Mr. Sentence who is going to retire next week noted today that he has always stood for gradual rise in the interest rate and the level of confidence in the Bank of England can suffer, due to the current financial situation. He also stressed that existing situation does not require urgent special changes in the monetary policy, however sharp increase in rates is possible in the future.
According to him high level of inflation retards economic growth and CPI is unlikely to revert to the level of 2% before 2012.
The issue of the interest rate is still open; regulator and market have opposite views on the subject. 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.
According to the data released at the end of the week, consumer confidence level 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.
