GBP: Sales of British Pound are still preserved

At the Forex currency market the British Pound Sterling rate is still traded downward on Wednesday due to negative external influence.

Forex forecast: MACD indicator for the pair GBP/USD is traded in the positive area; it started to descend again and is ready to shape a sell signal. Stochastic Oscillator is going down in the neutral zone and is giving a similar signal.

Forex recommendations: in case of break down at the level of 1.5755, target for the sale will be the levels of 1.5740 and 1.5720. If downward breakdown does not take place, the pair will be close to the current levels.

Yesterday, governor of the Bank of England Mervyn King said that sharp decline in inflation is expected over the next 6 months; in 2012 CPI will be   around the target level of 2%. At the same time, uncertainty in the ratio of rate and extent of the decline in CPI will be preserved; decline of inflationary pressure might happen instantly or gradually.

Today, investors are waiting for the publication of the inflation release. It is possible that the Bank of England will revise its forecast on the economic growth: up to 1% in 2011 and similarly in 2012.

At the meeting which was held earlier, the Bank of England kept interest rate unchanged at the level of 0.50% per annum as expected.   The rate of the Bank of England is at the current record-breaking low level since March 2009, largely due to the weak economic growth and rapid rise in inflation. Follow-up comments did not add anything new, the Bank of England remained loyal to the conservative policy and left previous size of QE in the amount of 275 billion pounds. It will take regulator another three months to finalize purchases as part of an additional package to QE and after that he can revert to revision of its volume. Nevertheless, Central Bank increased QE package only in October, therefore, it is hardly realistic to expect any serious monetary measures from British regulator.

According to statistics released at the end of last week, volume of industrial output in the construction sector of the UK was revised upwards in Q3 (it reduced by 0.2% against preliminary -0.6%). It is difficult to overestimate importance of this data: construction sector contributes about 7% of the country’s GDP and sooner or later positive dynamics of this sector will support economy.

British Prime Minister Cameron believes that there is severe turbulence in the market now while Europe is experiencing hard time. The rise in the rates will be disastrous in the current situation especially for households; so, government’s sympathies are obviously not in favour of bankers.