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At the Forex currency market the British Pound Sterling failed to maintain advantageous position yesterday and in the morning the currency determines movement direction while interest in risk is not too high.

Forex forecast: MACD indicator is in the positive area for the pair GBP/USD and is moving along the signal line, not giving any signals. Stochastic Oscillator begun to go up in the neutral zone and is shaping a buy signal.

Forex recommendations: in case of breakdown at the level of 1.6380, the target for purchase will be the levels of 1.6410 and 1.6450. If upward breakdown does not take place, the pair will consolidate close to the current levels.

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 data released yesterday showed that CPI in Great Britain increased by 0.2% m/m (+4.5% y/y) in May, which agreed with the forecast. Inflation is still high, remaining at two-year highs, and continues to grow.

As reported in the publication 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 has to leave interest rate at the current level of 0.50% per annum and stop using it as a shield against inflation.

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.

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. 

At the meeting of the Bank of England last week, interest rate was left unchanged at the level of 0.50% per annum, volume of assets redemption was also kept unchanged, at the level of stg200 billion. The follow- up comments did not contain anything fundamentally new, as expected.

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