Forex Blog
Blog-FX.Com

At the Forex currency market the British Pound Sterling rate is declining on Thursday morning in response to the continuing negative sentiments among investors.

Forex forecast: MACD indicator for the pair GBP/USD is growing in the negative area, shaping a buy signal. Stochastic Oscillator is going down in the neutral zone, giving a sell signal.

Forex recommendations: in case of break down at the level of 1.5890, target for the sales will be the levels of 1.5870 and 1.5850.

Macro-economic situation is Great Britain has not changed significantly. The Pound Sterling actively reacts to the changes in the external background where unsettled Greek issue interferes with the progress in buying.

The head of the Bank of England Mervyn King drew attention to the fact that Britain has effective medium-term financial plan and if QE1 had not been introduced, situation with bank lending would have been much worse. However, it is a double-edged sword, as no one can guarantee that QE2 can increase the volume of borrowing.

Meanwhile, King expects sharp decline in inflation in 2012. CPI in the UK rose by 0.6% m/m (+5.2% y/y) in September against the growth of 4.5% y/y in August. Obviously, inflationary pressure has soared upward, which creates new impediments to economy. We would remind that at the meeting in October the Bank of England decided to leave interest rate unchanged at the level of 0.50% per annum, at the same time, they increased volume of asset redemption program. Therefore, QE was increased to 275 billion pounds against the previous level of 200 billion pounds. In the follow-up comments the head of the Bank of England Mervin King said that the expansion of the asset redemption program has been provoked by the slow growth of the global economy, however QE will have a positive impact on the British economy in the future. According to him these measures are preventive since Britain is in the middle of the serious crisis now.

Member of MPC Mr. Dale noted earlier that he also expects sharp decline in CPI at the beginning of 2012. According to Mr. Will, a representative of the Bank of England and MPC, British economy demonstrates slow growth rate and a chance of recession in Q4 would not be a great surprise.

Debates about monetary policy are still going on in the UK. Thus, Mr. Bean noted last week, that, as the result of QE program, the level of inflation can rise by 0.5%; however positive effect of the incentive program is that GDP will get additional +0.5%. It became known earlier that consumer confidence index Gfk in the UK fell to -32 points in October against the forecast of -30 points. Thus, the level of confidence of British consumers fell to 32-month low. As it became known earlier retail price index BRC in the UK rose by 0.2% m/m (+2.7% y/y) in September. Volume of retail sales BRC in the UK increased by 0.3 y/y in September. Thus, according to the survey of the British Consortium of Retailers volume of retail sales rose slightly on annual basis last month; however monthly dynamics is mixed. Prices for food continued to grow, demand for clothes and footwear fell despite the seasonality. Earlier it became known that retail price index BRC in the UK increased by 0.2% m/m (+2.7% y/y) in September.? Volume of retail sales BRC in the UK increased by 0.3 y/y in September. Thus, according to the survey of the British Consortium of Retailers volume of retail sales rose slightly on annual basis last month; however monthly dynamics is mixed. Prices for food continued to grow, demand for clothes and footwear fell despite the seasonality. Therefore, basic demand is minimal at the moment. The data released earlier showed that volume of production output in the UK increased by 0.2% m/m (-1.0% y/y) in August.

As it became known earlier, preliminary GDP in the UK rose by 0.5% q/q (+0.5% y/y) in Q3. In addition, volume of industrial output increased by 0.5% q/q (-0.7% y/y) in Q3. Report on GDP became a good surprise for investors; however a member of MPC Mr. Osborne immediately stressed that Britain has to undergo a long way to achieve stability.

Tags: