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At the Forex currency market the British Pound Sterling rate goes down on Monday morning, since investors are moving away from risk, due to the downgrade of the ratings of Greece and Italy.

Forex forecast: MACD indicator for the pair GBP/USD has crossed the signal line from top to bottom and is moving down, giving a pair sell signal. Stochastic Oscillator sluggishly increasing in the neutral zone, giving a pair buy signal. 

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of1.6200, the levels of 1.6225 and 1.6240 will become the target for the purchase. If the level of 1.6170 is exceeded, the level of 1.6150 will become the target for the sale.

No important British statistics is scheduled for the release at the beginning of the week, however on Tuesday investors expect publication of the net borrowing of the public sector and cash requirements of the government in April; the second part of the data on GDP in the UK for QI will be made public on Wednesday.

On Friday, 27 May the Nationwide statistics on house prices will be released

It was made public last week that retail sales in the UK increased by 1.1% m/m (+2.8% y/y) in April. A lot of UK macro-statistics was released yesterday (index of CPI rose by 1.0% m/m (+4.5% y/y) in April against the forecast of growth by 0.7% m/m (+4.1% y/y); index of retail prices RPI increased by 0.8% m/m (+5.2% y/y) in April, which agreed with the forecast.) Therefore, inflationary pressure in the country continues to grow.

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.

However, the Bank of England think 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. Bean noted yesterday that unemployment will partly contain inflation; however inflationary pressure can intensify in the second half of 2011. In this case, while consumer spending remains restrained, and net exports are disappointing, we cannot expect that tax payers will support the banks.

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