GBP: Reduction is possible for British Pound Sterling

At the Forex currency market the British Pound Sterling rate continues to be traded downward.

Forex forecast: MACD indicator is in the positive area for the pair GBP/USD and is going down, confirming a previous sell signal for the pair. Stochastic oscillator remains in the oversold zone today and is giving a similar signal. 

Forex recommendations: in case of breakdown at the level of 1.6000, traders’ targets today will be the levels of 1.5980 and 1.5960. More distant bearish target is at the level of 1.5820 – this was the level at which the GBP started to consolidate.

The data of Friday showed that production in the British construction sector reduced by 7.5% m/m in January; however it increased by 5.6% on annual basis. The index fell by 16.6% y/y earlier in December due to harsh weather conditions. 

At the meeting last week the Bank of England decided to keep interest rate at the previous level of 0.50% per annum, the volume of debt redemption securities was also left unchanged – 200 billion pound sterling. 

The Pound responded to the lack of allusions regarding the start time of the monetary policy tightening by drastic decline. Objectively levels of inflation have been above the levels indicated by the regulator for over a year already, increasing pressure on the recovery of the British economy which is not too steady. Meanwhile interest rate is kept at the level of 0.5% per annum. The increase of VAT in the UK at the beginning of this year contributed to the growth of prices in British shops – the index rose to 24 month highs on annual basis in February. According to the estimates of BRC retailers’ prices rose by 2.7% y/y last month against the rise by 2.5% in January.

Thus, taking into account this factor as well, sooner or later the Bank of England will have to adopt measures aimed at reducing inflationary credibility.

 

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