Forex Blog
Blog-FX.Com

At the Forex currency market the British Pound Sterling continues to decline on Friday morning, having lost more than two figures this week.

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

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

It became known yesterday that volume of retail sales in the UK fell by 1.4% m/m (+0.2% y/y) in May. Sales in Britain demonstrated decline for the first time since January 2010, and it is not a very good sign for the economy.

In other respects, economic situation in the country remains unchanged.

As reported in the edition of “Independence”, the Bank of England must be prepared to save national economy from the threat of double dip recession, and according to the comments of BDO representative, the regulator shall leave interest rate at the current level of 0.50% per annum and do not use it as a shield against inflation. Rating agency Moody's warned Great Britain earlier that the country can 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 for its further raise, and it is necessary to increase the rate despite the fact that the level of inflation turned out to be below the forecast. According to him all conditions, required for the preventive measures of the Bank of England have been created, and the sooner the BoE launches tightening policy, the greater flexibility it will give to the regulator in the future.

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

The Bank of England believes 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, Representative of the Bank of England Mr. Fisher noted earlier that bad state of economy could prompt the Central Bank to 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. 

Tags: