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At the Forex currency market the British Pound Sterling rate goes down on Wednesday morning.

Forex forecast: MACD indicator for the pair GBP/USD has crossed the signal line from bottom to top, started to increase, and is giving a pair buy signal. Stochastic Oscillator is moving along the signal line in the neutral zone, and is not giving a clear signal.

Forex recommendations: in case of breakdown at the level of 1.6450, the target for purchase will be the levels of 1.647 ? 1.6485. If upward breakdown does not take place, the pair can consolidate close to the current levels.

It became known today that retail price index BRC in Great Britain rose by 2.3% y/y in May against the growth of 2.5% y/y in April. Slowdown in the retail price growth is not a good sign.
In other respects, economic situation in Great Britain has not changed fundamentally.

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.

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, 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. 

Representative of the IMF Mr. Lipsky noted earlier that financial policy of the UK fits the situation and his colleague, Mr. Chopra stressed that growth in Britain was revised in 2011, due to the GDP in QI and commodity prices. Comprehensive recommendation from the International Monetary Fund was to continue to reduce deficit and carry out accommodative monetary policy.

A meeting of the Bank of England will be held on Thursday this week. According to the economists from Barclays, regulator will raise the rate not in August but in November because new signs of weakness in the British economy and its dependence on the external demand are not favourable at the moment to start monetary policy tightening.
 
 

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